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  13. (Accounting) Move item from...

(Accounting) Move item from non-conforming stock to normal stock, with average purchase cost

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The following describes the accounting transactions that are created when you move an item from the non-conforming stock in one warehouse to the normal stock in the same warehouse. The cost type in this example is Average purchase cost.

In this example the movement causes an average cost change. There are also goods in transfer between warehouses, i.e. the item is entered on an Internal Replenishment Order, the Internal Sales order has been confirmed but the Internal Purchase order is not yet received.

Prerequisites

Non-conforming cost price 8.00
Average cost in Item file 10.00
Quantity in normal stock before move 70
Quantity in transfer 20
Quantity moved 10

Created transactions

Transaction type Description Amount
Debit		 Amount
Credit		 Calculation/Result/Additional info
942 Stock value non-conforming stock   80.00
Cost price * Quantity moved

8.00 * 10 = 80.00

This transaction moves the stock value from the non-conforming stock to the normal stock, using the non-conforming cost value.
901 Stock value 80.00  
Cost price * Quantity moved

8.00 * 10 = 80.00

This transaction moves the stock value from the non-conforming stock to the normal stock, using the non-conforming cost value.
The next six transactions are created since the cost type is Average purchase cost, which means that the system has to recalculate the average cost value. As the new average cost differs from the old average cost, the system also has to re-value the whole stock, including the goods in transfer. The system performs the following calculations:

New stock value: The system calculates the new stock value for the quantity on hand after the movement:

Old stock value before movement + Moved stock value.
In this example the figures are:
Old stock value: 10.00 * 70 = 700.00
Moved stock value: 8.00 * 10 = 80.00
New stock value: 780.00

New average price:
The system then calculates the new average cost for the quantity on hand after the movement:

New stock value / New quantity on hand
In this example the figures are:
New stock value: 780.00
New quantity on hand: 80
New average price: 780.00/80 = 9.75
901 Stock value   17.50 Decrease of the stock value for the stock before the move.

Old stock value – (New average price * Old quantity on hand)

The decrease: 700.00 – (9.75 * 70) = 17.50

In this example the figures are:
Old stock value: 10.00 * 70 = 700.00
Old quantity on hand: 70
New average price: 9.75

The stock value for the quantity on hand before the movement has decreased, as the new average price is less than the old average price.
915 Average cost change 17.50    
907 Goods in transfer   5.00 Decrease of the stock value for goods in transfer.

Old stock value for goods in transfer – (New average price * Quantity in transfer)

The decrease: 200.00 – (9.75 * 20) = 5.00

In this example the figures are:
Old stock value for goods in transfer: 10.00 * 20 = 200.00
Quantity in transfer: 20
New average price: 9.75

The stock value for the goods in transfer has decreased, as the new average price is less than the old average price. The system calculates the decrease of the stock value for the goods in transfer. Note: Goods in transfer are items in transfer from one warehouse to another.
915 Average cost change 5.00    
901 Stock value 17.50   Increase of the stock value for the moved stock.

(Moved quantity * new average price) – old stock value for moved quantity

The increase: (10 * 9.75) – 80.00 = 17.50

In this example the figures are:
New average price: 9.75
Old stock value for moved qty: 8.00 * 10 = 80.00

The stock value for the quantity moved has increased, as the new average price is higher than the cost price for the moved item. The system also calculates this increase.
915 Average cost change   17.50  

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