Re: COGS incorrect when invoices are reposted

["Chris Travers" <..hidden..>]

Hi;

This is a corner case (and one which probably won't ever happen, and
an accountant can correct it easily enough, but there are cases where
this is still suboptimal...

On 9/21/06, Darald Bantel <..hidden..> wrote:

> Why not use a corrective invoice - that means a reversing invoice. So if
> you some customer Sam a widget 1325 you would buy widget 1325 from Sam
> in a second invoice - everything balanced out and accurate.

So, what happens if I buy 200 widgets at $10/unit and then the price
goes up to $20 and I buy 10 more.  Then I sell you 100 of them (cogs
is $1000) but then if I buy them back at last cost, I record $2000 in
inventory purchases (and my COGS is now $1000 below when I made the
sale, and so could be negative).  If I don't sell them in that
accounting period, the numbers are off and need to be adjusted.  This
isn't the end of the world as at least it is transparent and can be
adjusted by an accountant :-) (this is not the case with re-posted
invoices).

I think the best way to handle this isn't to do a simple repurchase but:
Calculate the COGS on the 100 most recently sold widgets ($1000), take
this from the COGS in the original invoice ($1000 - $1000 = $0) and
apply that as an adjustment at the time of the original invoice.
Again, there are cases where that number may be off but again, I would
thing it could easily be adjusted for end-of-period reports.

Returns represent a more complicated issue if there are a large number
of parts returned.

Best Wishes,
Chris Travers