Re: Thoughts on Voiding Invoices

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

David,

There are *good* accounting reasons for making these assumptions.  I
am not a CPA, but I have had to learn a great deal about accounting in
the course of working with this sort of software.

If I may say so, you need to relax a little.

On 9/24/06, David Tangye <..hidden..> wrote:

> Sounds good so far.
> > The purchase is assumed to be extremely recent,
> That assumption represents an bug due to faulty analysis.

Howso?  The only case I can think of is where an invoice is issued by
mistake and then discovered later (either by the customer challenging
it or so forth).  In this case, I think it is reasonable to assume
that an accontant may be involved in adjustments.

Let me make this clear-- voiding is something you do to invoices that
were never valid in the first place.  It is like writing "VOID" across
the surface of a check-- it isn't something that you get to go back
and do after the fact.  So I think that the assumption that the
invoice was recently issued is sufficiently valid as to require an
accountant's oversight when that is broken.

> >  so the cogs
> > numbers are taken from the most recent purchases.
> COGs should be the reverse of whatever the COGS for that invoice was.
> Its irrelevant what changes have since been made. If I sell you an old
> hat, and realise I should not have/didn't actually sell it after all,
> its irrelevant that the new hats cost me twice as much.

The problem is that you screw up FIFO accounting if you do things that
way.  In short, your COGS might be wrong on your tax return.

FIFO invoentory is calculated in a way that assumes your inventory
on-hand is the last inventory you bought.   So if I void an invoice,
it needs to return my inventory values to wat they would have been if
the other invoices had not sold that many parts.

Make sense?

> >   I can't think of
> > any situation where this will get you in trouble so I am going to
> > stick with it. (In those cases where the workflow is sufficiently
> > broken to create problems, the void and original invoice are flagged
> > so an accountant can easily spot the problem.)  Note though that under
> > certain circumstances the reversed COGS numbers will be different than
> > the actual invocied COGS numbers if a lot of invoices are issued at
> > once and then one in the middle was voided.
> This seems contradictory.

No.  Just because your COGS number is not fully reversed doesn't mean
that it is inconsistant.

See above.  It has to do with strict accounting rules as to how
inventory on-hand is valued.

> >
> > A returns button will bring up a new invoice with all the parts as
> > negative.  THe clerk then adjusts he number of the parts and creates a
> > new invoice.  These parts are bought back at last cost, and the
> > invoices flagged for easy review.
> Same bug here being introduced. If I sell you an old hat, and you return
> it, its irrelevant that the new hats now cost me twice as much.

Yes it is relevant.  You can't just re-instate inventory amounts out
of the middle just because the product was returned.  Or if you do, I
hope you have a good tax lawyer when the IRS comes to audit.

Hope this helps,
Chris Travers