Company: Link Technologies
Case No: L12773. Project: 14.10: LinkSOFT version 14.10 - October 2022
Logged By: Vineshwar Prasad (Edge Business Solutions) on behalf of Sanjay (Link Technologies) on 12 Aug 2022 08:41AM
Priority: Medium
Product: Point of Sale
Group: Software Defect
Time Taken: 19.00 (Weight: 19.00)
Assigned To: Development
Circulation: Development, Navneet Kumar, Sanjay, Vineshwar Prasad
Resolve By: Friday, 30 September 2022 12:00 AM [614 days since logged date]
Status: Closed
Subject: Check on how Inventory Valuation is Calculated
Summary:    Bula Team,

We have done the following test to check how Inventory Valuation is Calculated.
  1. Application Hosted on: https://linktechnologies.com.au/DEMO-LinkSOFT-EDGE
  2. Version: 13.40.0602.GA
  3. Product Code - TESTVAL
  4. Costing Method - Average
Table 1 - Manual Average Cost Calculation
Line

TESTVAL

 

Qty

Cost

Sub Total (cost)

Total Cost (running)

Total Qty (running)

Avg Cost

1

Adjust In

ADAA000658

       1.00

     10.00

                      10.00

                                10.00

                                1.00

        10.00

2

Sale

RC000014

-     1.00

     10.00

-                     10.00

                                     -   

                                    -   

10.00

3

Sale

RC000015

-     2.00

     10.00

-                     20.00

-                              20.00

-                               2.00

        10.00

4

Adjust In

ADAA000659

     10.00

     12.00

                    120.00

                              100.00

                                8.00

        12.50

5

Sale

RC000016

-     1.00

     12.50

-                     12.50

                                87.50

                                7.00

        12.50

6

Purchase

PUR00022

       5.00

     11.50

                      57.50

                              145.00

                              12.00

        12.08

 

Table 2 - System Average Cost Calculation
Line

TESTVAL

 

Qty

Cost

Sub Total (cost)

Total Cost (running)

Total Qty (running)

Avg Cost

1

Adjust In

ADAA000658

       1.00

     10.00

                      10.00

                                10.00

                                1.00

        10.00

2

Sale

RC000014

-     1.00

     10.00

-                     10.00

                                     -   

                                    -   

10.00

3

Sale

RC000015

-     2.00

     10.00

-                     20.00

-                              20.00

-                               2.00

        10.00

4

Adjust In

ADAA000659

     10.00

     12.00

                    120.00

                              100.00

                                8.00

        12.00

5

Sale

RC000016

-     1.00

     12.00

-                     12.00

                                88.00

                                7.00

       12.00

6

Purchase

PUR00022

       5.00

     11.50

                      57.50

                              145.50

                              12.00

        11.80


System Calculated
  1. Inventory Valuation Cost - 12.13
  2. Product Master Cost - 11.7917
  3. There is a mismatch of costs calculated by the system
Regards
Vineshwar Prasad
Audit Notes:Edited by sanjay on 06/09/22 14:26. Edited by sanjay on 15/08/22 10:46. Edited by sanjay on 15/08/22 09:32. 
14 Jun 202210:52AM Comment 1 by Sanjay (Link Technologies) Assigned To: Development Followup Date: 14-06-2022 10:49 AM Time Taken: 2.00

Teams meeting with Vineshwar and sanjay

  1. Reviewed the case header and added line numbers and Title to Table 1 and Table 2
  2. Average Cost is calculated when stock is brought In, wither through adjustments or Receipts
  3. When the stock reaches ZERO "In Stock", the Average Cost is Zero

Next Step:

  1. Vineshwar to review the case and check accounting standards
  2. Log a Development case if we need to change the average cost calculations

08 Aug 202211:48AM Comment 2 by Navneet Kumar Assigned To: Vineshwar Prasad (Edge Business Solutions) Followup Date: 12-08-2022 11:37 AM Time Taken: 4.00 Notes: ETC extended from: 07/06/2022 to 12/08/2022
We have done the following test to check how Inventory Valuation is Calculated.
  1. Application Hosted on: https://linktechnologies.com.au/DEMO-LinkSOFT-EDGE
  2. Version: 14.00.0729.GA
  3. Product Code - P10011
  4. Costing Method - Average
Table 1 - Average Cost Calculation on Product Master (Correct)

Task

Details

Transaction Number

Quantity

Cost

Sub total QTY

Sub Total Cost

Total Quantity

Total Cost

Average Cost

Comments

1

Purchase Order

PR000007

     10.00

  10.00

              10.00

              100.00

                10.00

     100.00

              10.00

 

2

Purchase Order

PR000008

        5.00

  10.00

                 5.00

                50.00

                15.00

     150.00

              10.00

 

3

Purchase Order

PR000009

        1.00

  10.00

                 1.00

                10.00

                16.00

     160.00

              10.00

 

4

Sales

TX000020

-      5.00

  10.00

-               5.00

-              50.00

                11.00

     110.00

              10.00

 

5

Sales

TX000021

-      6.00

  10.00

-               6.00

-              60.00

                  5.00

        50.00

              10.00

 

6

Purchase Order

PR000010

        5.00

  15.00

                 5.00

                75.00

                10.00

     125.00

              12.50

 

7

sales

TX000022

-      5.00

  12.50

-               5.00

-              62.50

                  5.00

        62.50

              12.50

 

8

Sales

TX000023

-    10.00

  12.50

-             10.00

-            125.00

-                 5.00

-      62.50

              12.50

 

9

Purchase Order

PR000011

     10.00

  15.00

              10.00

              150.00

                  5.00

        75.00

              15.00

Correct - Product Master is showing Average cost as $15, SOH - 5

10

Sales

 

-      1.00

  15.00

-               1.00

-              15.00

                  4.00

        60.00

              15.00

Correct - Product Master is showing Average cost as $15, SOH - 4

 

Table 2 - Average Cost Calculation on Inventory Movement and Inventory Valuation Report (Incorrect)

Task

Details

Transaction Number

Quantity

Cost

Sub total QTY

Sub Total Cost

Total Quantity

Total Cost

Average Cost

Comments

1

Purchase Order

PR000007

     10.00

  10.00

              10.00

              100.00

                10.00

     100.00

              10.00

 

2

Purchase Order

PR000008

        5.00

  10.00

                 5.00

                50.00

                15.00

     150.00

              10.00

 

3

Purchase Order

PR000009

        1.00

  10.00

                 1.00

                10.00

                16.00

     160.00

              10.00

 

4

Sales

TX000020

-      5.00

  10.00

-               5.00

-              50.00

                11.00

     110.00

              10.00

 

5

Sales

TX000021

-      6.00

  10.00

-               6.00

-              60.00

                  5.00

        50.00

              10.00

 

6

Purchase Order

PR000010

        5.00

  15.00

                 5.00

                75.00

                10.00

     125.00

              12.50

 

7

sales

TX000022

-      5.00

  12.50

-               5.00

-              62.50

                  5.00

        62.50

              12.50

 

8

Sales

TX000023

-    10.00

  12.50

-             10.00

-            125.00

-                 5.00

-      62.50

              12.50

 

9

Purchase Order

PR000011

     10.00

  15.00

              10.00

              150.00

                  5.00

        87.50

              17.50

1. Incorrect - Average Cost because system is also adding negative balance from previous line

2. Incorrect - Inventory Movement report is showing total cost as $87.50, SOH - 5

3. Incorrect - Inventory Valuation is showing total cost as $87.50, SOH - 5, Average Cost - $17.50

10

Sales

 

-      1.00

  15.00

-               1.00

-              15.00

                  4.00

        72.50

              18.13

1. Incorrect - Average Cost because system is also adding negative balance from previous line

2. Incorrect - Inventory Movement report is showing total cost as $72.50, SOH - 4

3. Incorrect - Inventory Valuation is showing total cost as $72.50, SOH - 4, Average Cost - $18.13

 

Next Step - Discuss with Development Team

Regards
Navneet Kumar & Vineshwar Prasad

11 Aug 202202:04PM Comment 3 by Sanjay (Link Technologies) Assigned To: Development Followup Date: 19-08-2022 01:48 PM Time Taken: 1.00 Notes: ETC extended from: 12/08/2022 to 19/08/2022

Discussion Notes - Sanjay and Vineshwar:

  1. "Inventory Valuation Report" should not include "cost" for items with "negative" " In-Stock"

Next step: Transfer case to Development and assign to sanjay


12 Aug 202208:43AM Comment 4 by Vineshwar Prasad (Edge Business Solutions) Assigned To: Sanjay (Link Technologies) Followup Date: 16-08-2022 10:42 AM Notes: ETC extended from: 19/08/2022 to 16/08/2022
Assigning case to development

15 Aug 202209:32AM Comment 5 by Sanjay (Link Technologies) Case L12773 added to project 14.10
15 Aug 202209:32AM Comment 6 by Sanjay (Link Technologies) ETC was changed from 16/08/2022 to 19/08/2022
02 Sep 202202:04PM Comment 7 by Sanjay (Link Technologies) Assigned To: Development Followup Date: 06-09-2022 03:54 PM Time Taken: 12.00

Hi Vineshwar,

The difference you are seeing is to do with the concept of "Valuation" and "Average Cost".

Valuation refers to the "value" of stock movement, while Average Cost refers to the "average" cost of Incoming items, from Adjustments, Purchases and Transfers, which is used for the purpose of Sales Analysis and Sales Markups.

These two figures don't match when you have "negative stock" in play.  Here is an example to explain the concept:

  1. Refer to Table 1 below. We have done an "Adjustment IN" and an "Adjustment OUT". 
  2. Note that the VALUATION based on these two transactions is $140 and there are only "two" items in stock, however, the "Average Cost" of this item is $20, which is different from the Valuation "Average Cost" which is $70

Table 1 - Valuation and Average Cost Concepts

DateTransactionQuantityUnit CostCost Movement
01/08/2022Adjustment OUT-1010-100
02/08/2022Adjustment IN1220240
 Total  140
Average Value (In Stock divided by Cost Movement)
   70

If you have any queries regarding this support incident, please email admin@linktechnologies.com.au and include the Case No: L12773 in the subject line of all emails regarding this issue.

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