• From: Pakistan, Karachi
  • Registered: 03/03/2015
  • Posts: 651

Topic: Cost of Inventory For Back Dated Transactions

I have been put in a situation by one of my client (a chartered accountant).

Taking transactions of Item A.

Month 1: By Recording Sales and Purchases the Weight Avg Cost of Item A comes at 85.

Month 2: By Recording Sales and Purchases the Weight Avg Cost of Item A comes at 80.

Month 3: By Recording Sales and Purchases the Weight Avg Cost of Item A comes at 73.


Now client says that after reconciliation he found that he missed on Sales Entry of Month1. When he recorded that on backdate the system recorded the cost of inventory @ 73.

He says that by this the profit of Month1 is Over Valued. The system shall record the Back Dated Transactions on the cost of inventory prevailing in that date.

Can anyone help me how to combat this argument? Is it possible to record the back dated transactions the way he is suggesting and then adjusting the latest Average Cost accordingly.

Regards

www.boxygen.pk

boxygen's Website

  • From: Singapore, India, Chennai
  • Registered: 05/02/2009
  • Posts: 6,089

Re: Cost of Inventory For Back Dated Transactions

It should suffice to make a separate transaction in the current date with all current values for the changed part alone as only now the error came to light.

Otherwise, all average values since the Month 1 will get affected and so will all transactions that rely on such computed values.

In your situation, a backdated Journal Entry to an adjustment revaluation account may be in order and contra-ed on current date so as not to affect the entries in between.

apmuthu's Website

  • From: Pakistan, Karachi
  • Registered: 03/03/2015
  • Posts: 651

Re: Cost of Inventory For Back Dated Transactions

Yes, this can be done manually. He was insisting that system shall be smart enough to handle this automatically smile

www.boxygen.pk

boxygen's Website

  • From: Singapore, India, Chennai
  • Registered: 05/02/2009
  • Posts: 6,089

Re: Cost of Inventory For Back Dated Transactions

@boxygen: Please state what logic can be applied to such transactions especially when stock moves, costing / valuation, etc are going to be affected and all transactions since will have to have their reports amended.

apmuthu's Website

  • From: Pakistan, Karachi
  • Registered: 03/03/2015
  • Posts: 651

Re: Cost of Inventory For Back Dated Transactions

Yes, I am also at Fix. Will think over it and try then revert

www.boxygen.pk

boxygen's Website

  • From: Saudi Arabia, Riyadh
  • Registered: 01/22/2019
  • Posts: 12

Re: Cost of Inventory For Back Dated Transactions

Hi i am looking for the material issuance for the projects ( not manufacturing)  and material receipts from the project.