Production Order Debit Note Recording

Hi, I have created a non-inventory cost account ‘printing overhead’. This non-inventory cost is incurred when converting raw material into finished items & the process is outsourced.

Now the problem is the vendor made a mistake & the raw material was wasted. The production order was created as $1 for raw materials & $1 for non-inventory costs. The purchase invoice of $1 was posted in the printing overhead. The vendor must bear the raw material wasted & overhead which the vendor was supposed to charge me.

Now when I create a debit note of $2 for the vendor account, the ‘printing overhead’ account goes into negative. In my understanding, non-inventory account should stand at $0 (nill).

How to record this transaction correctly?

Based on your description, you should not enter any transaction at all for the mistake. Your vendor made a mistake which he must absorb. When he gets the order right, then you should enter the purchase invoice for the originally planned price.

How to adjust the inventory wasted? The vendor did some previous work & had amount payable so I deducted the material wasted from that amount.

If it was your inventory, use an inventory write-off. Post the write-off to the supplier’s Accounts Payable balance. In effect, the supplier would be accepting payment in kind. Your local regulations may impose tax implications as a barter transaction.

It might be more straightforward to write the inventory off to a wastage account and ask the supplier for a credit note, which would be entered as a debit note. The difference between this, and what you originally did is that in this instance, you are only debiting the wasted inventory.


ok i have understood since in fuel some days you can get write off and other days you will not get lost of fuel instead due to dipping measurements you will find that you have got additional fuel compared to the amount it was supposed to be recorded has been sold
how can you record when inventory has increased a little number compared to the one on book how can i record that?

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