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Questions and comments on inventory management.
- Subject: Questions and comments on inventory management.
- From: Jose Ildefonso Camargo Tolosa <..hidden..>
- Date: Fri, 27 Apr 2012 12:16:33 -0430
First, I have to say: great work on LedgerSMB, and I think it is a
Now, I have these questions/comments regarding inventory management:
1. Does LedgerSMB allows to use moving average instead of FIFO while
doing sales? see, according to what I have read, and the tests I did
on the system, currently LedgerSMB uses FIFO, so, it have something
like "lots" of parts, where the system assumes that I'll be expending
the oldest lots first, and thus it will subtract from the Inventory
account the cost of the oldest pieces first, additionally, I think the
profit would be calculated by using the cost of the oldest lot too.
In my country, because of legal requirements, you *have to* use the
moving average cost on sales for profit calculation (otherwise profit
would likely be higher for oldest parts). But the problem doesn't end
here, please, read on.
2. Lets talk about initial inventory. Lets say that my company is not
a new one, and that I'm moving from manual bookkeeping and inventory
to LedgerSMB. In this case, I have to enter the initial amounts for
each account, including inventory, but.... how to do the inventory
part? according to the documentation, I would have to create a (fake?)
invoice to prime the inventory: that'll generate a accounts payable
entry, that I have to pay somehow, and... where would I pay that from?
cash? bank account? capital? (please, tell me: I really have no idea)
ie: I'm not actually buying the inventory again, I'm just adding what
I already have (just like I did with other accounts: just add the
initial value), so.... I think there is something wrong here, why?
well.... I'm just an IT guy, not an accountant, but after I suggested
the "fake invoice" method to prime the inventory, I got scolded quite
badly by the two accountants, and they even said it could be
considered illegal, and could violate the general accounting
principles, and that all systems should include an inventory
management module, where you could actually manage it (add / remove /
....), without the need to necessarily use an invoice to add parts
(what if, for example, I'm mining the parts).
3. What about inventory lost? well, things happen... lets say you get
your parts damaged (or materials damaged, while doing manufacturing),
how do you report that on LedgerSMB? I mean, I would have to adjust
the inventory accordingly, and record the loss on some account
What do you think about all of this?
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