Cost Adjustments

A purchase invoice cost adjustment is used to add or subtract dollar amounts to the value of your inventory items that you receive. A cost adjustment usually implies that you have already received the product from a supplier and created an inventory receipt. For example, you may want to include trucking fees as part of the value of an inventory item being trucked (rather than expensing the trucking fees separately) since it represents at least part of the cost of the product.

A cost adjustment is used when:

         the cost of a product has changed (a credit, rebate, or an extra charge for the products), but is indicated on a separate purchase invoice.

         freight or other charges are incurred and need to be added to the value of the inventory (rather than being expensed separately).

Cost adjustments can be made on existing or new purchase invoices for inventory items only, and they can have positive or negative values. Although multiple products can be added to a purchase invoice, each product requires its own cost adjustment for recording purposes (a Cost History Table is created for each product). A cost adjustment affects the value of your inventory for the product selected and the cost of goods sold (COGS) when the product is sold.

A cost adjustment does not need to be applied to the entire product row and can be done in a partial amount. If you choose to do a partial cost adjustment, the amounts are split into two lines on the inventory receipt.

Note

If you do not want your inventory value and/or COGS affected, add a new purchase invoice with a non-inventory transaction instead of a cost adjustment for the product; the expense is recognized immediately.

After a cost adjustment is made for a product, agrē automatically finds and updates (automatic recosting) all the original postings that are associated with the product costs being adjusted, including postings made to closed accounting periods. Therefore, your COGS includes the cost adjustment and your margins are reflected correctly.

Note

Supplier credits or rebates can be posted to a general rebate GL account (add a non-inventory transaction) or be attached to specific products to show the actual unit costs of the products (add a cost adjustment).

When agrē updates postings made to closed account periods, a message indicating the update appears in the Message Centre. Postings are never made to closed fiscal years.

What you'll find:

Adding Cost Adjustment Items to Purchase Invoices

Linking Cost Adjustments to Existing Purchase Orders

Editing Cost Adjustments

 

Related topics:

Adding Purchase Invoices

Editing Purchase Invoices

Recording Payables

Example: Inventory Write Downs

 

Adding Cost Adjustment Items to Purchase Invoices

To add a cost adjustment item to a purchase invoice

         Ensure the mandatory information (and optional information, if needed) is completed on the purchase invoice.

         On the Add Purchase Invoice window, click the Cost Adjustments tab and then click Add Product Row.
The Add Cost Adjustment window opens.

Tip

If you're adding a freight bill or rebate that applies to multiple products/loads, click Add Multiple. Multiple Cost Adjustments apply to Inventory Receipts only and will allocate a portion of the Total Amount (exclude any taxes) to each unit selected based on:
Cost Adjustment per unit = (Line Amount / Sum of Line Amount) * Total Amount / Quantity of line

Taxes cannot be included as they are calculated per line to 2 decimal places. With rounding the sum of the line totals would likely not equal the total tax amount exactly, so tax totals are added manually to the Taxes and Credits tab.

         In the Product box, enter the product that requires a cost adjustment.
Click Find to search for a specific product.

         In the Adjustment Units box, optionally change the unit of measurement for the product of the cost adjustment.
The main unit is selected by default. A cost adjustment is made in main units for the product. If you change the units, two new boxes appear to help convert the selected units into main units: Cost Adjustment/Main Unit and Quantity (in Main Units). If you enter data in the Cost Adjustment/Main Unit and Quantity (in Main Units) boxes, agrē automatically converts the data into main units for you, which appears in the Cost Adjustment/Unit and Quantity (in Adj Units) boxes.

Notes

Changing the adjustment units is for convenience only. The final cost adjustment and quantity is applied in main units.

You can enter the cost adjustment total value before the cost adjustment/unit value so that the cost adjustment/unit value is calculated automatically instead.

         In the Cost Adjustment/Unit box, enter the cost adjustment per unit of the product.
The value can be positive or negative. Positive values indicate an increase in cost; negative values indicate a decrease in cost.

         In the Quantity (in Adj Units) box, enter the quantity of the product to be adjusted.

         In the Cost Adjustment Total box, optionally change the total amount of the cost adjustment.
The quantity multiplied by the cost adjustment/unit is entered by default.

         Select the GST Applies check box if GST applies to this item.
If the GST Applies check box is selected, the GST Included check box is available.

         Select the GST Included check box if the total price includes GST.
If you clear the GST Included check box, GST must be added separately on the Taxes and Credits tab.

Note

After the cost adjustment information is entered, the next step is to search for inventory receipts (or other types of inventory activity) for the products requiring the cost adjustment. The cost adjustment can then be applied to those units.

         Enter your search criteria under the five sections on the Find Product Cost History window: Activity Type, Supplier, Date Between, Location, and Reference.

         Activity Type:
A particular type of inventory activity (or all types): location transfer, inventory receipt, manufacturing, inventory adjustment.

         Supplier:
Defaults to the same supplier as on the header if one has been selected; can be changed manually (or deleted to filter for all suppliers).
You can only choose a supplier if you’ve chosen Inventory Receipt as an activity type, otherwise it is disabled.

Tip

Click Find to search for a specific supplier.

         Date Between:
A date range for when the activity types were created (e.g. the date on an inventory receipt).

         (Config U) Location:
The location that owns the activity type.

         Reference:
A specific activity type reference number (or part of the reference number; a blank in this box searches for all reference numbers).

         Click Refresh List.
The search results are shown in the table. If no results are found, the list is blank and the message “No Inventory Activities found” appears in the bottom left corner.

         In the first column with the check boxes, select all the check boxes of the items that you want to make cost adjustments to.

Tip

To quickly select and clear all the items in the list, click Select All and Deselect All.

Note

The Total Selected box displays the running total of items selected for the cost adjustment.

         Click Use Selected Rows.
The Add Cost Adjustment window closes and the product is shown in the Add Purchase Invoice window. If you selected more than one item, the items are combined into one row for the product; however, you can view additional cost adjustment details.

Note

A cost adjustment does not need to be applied to the entire product row and can be done in a partial amount. If the quantity you enter for the cost adjustment is less than the total quantity for the selected product row, a message appears indicating that agrē will split the product amount in order to do the partial cost adjustment. Click Yes to proceed (you cannot reverse this step), or click No to cancel.

Tips

Click Show Details to view additional cost adjustment details for the product (e.g., activity type). The Cost Adjustment Details window opens and you can view the additional cost adjustment details. Click Exit to return to the Add Purchase Invoice window.

To remove an item from the list, select the item and click Remove Row.

Note

The Total Cost Adjustments box displays the running total of cost adjustment items added to the purchase invoice. The Total Purchase Invoice box displays the running total of the payables added to the purchase invoice.

         (Config C) Click Save.
The Add Cost Adjustment

The product records, costs, and postings are updated, including postings made to closed accounting periods. If applicable, a message indicating that postings were made to closed accounting periods appears in the Message Centre. Postings are never made in closed fiscal years. For information on costing, see Costing Overview (Inventory).

Linking Cost Adjustments to Existing Purchase Orders

When you link to existing purchase orders from purchase invoices, you are associating items on the purchase invoice to those same items on the purchase orders. You can only link to inventory purchase order items. In order to link, the billing units for an item on a purchase invoice must match the units specified for the item on the purchase order.

The prices for the items on the purchase invoice are updated so that they match the prices quoted on the purchase order. If the purchase order does not have specified prices, the current prices are displayed on the purchase invoice.

When the purchase invoice is saved, information on the purchase order and purchase invoice is updated: the referenced purchase order is updated to reflect the quantity taken on the purchase invoice, and the location of the item on the purchase invoice is changed to match the location of the item on the purchase order.

To link to an existing purchase order

         Ensure the mandatory information (and optional information, if needed) is completed on the purchase invoice.

         On the Add Purchase Invoice window, click the Cost Adjustments tab.

         Click Add Product Row.
The Add Cost Adjustment window opens.

         Add a product cost adjustment and click Use Selected Rows.

         In the Item list, select the item you want to link to the purchase order item and then click Link to PO.
The Purchase Order Link window opens. If there are no active rows (items) on purchase orders for this item and supplier, the list is blank and the message “No Lines found” appears in the bottom left corner. Click Exit to go back to the Add Purchase Invoice window.

Note

Each row in the list is a cost adjustment item on a purchase order. The reference number indicates which purchase order the item belongs to; therefore, if multiple items have the same reference number, they exist on the same purchase order. When you link to them, the purchase order reference number displays in the Item list.

Additionally, items that are set to prepaid on purchase orders are automatically available to be prepaid on purchase invoices when they are linked to (unless you have insufficient prepayment funds).

         Select the Include completed purchase order lines check box and then click Refresh List if you want items with a completed status to appear in the list and be available to link to.

         In the Quantity Received box, enter the quantity of the item you have received from the supplier and then click Refresh List.

         In the Purchase Order Item list, select the item to link to the purchase invoice item and then click Use Selection.
The Purchase Order Link window closes and the PO Reference column is updated on the Add Purchase Invoice window.

Note

If the quantity you enter for the purchase invoice item is greater than the quantity available for the purchase order item, a message appears asking if you want to exceed the ordered quantity. When the quantity received is equal to or greater than (overfills) the quantity ordered, the status of the item is changed to complete. Click Yes to exceed the ordered quantity, or click No to cancel.

         Click Save.
The Add Cost Adjustment window closes.

Editing Cost Adjustments

Use the Edit Row button to change existing cost adjustment rows.

Business Rules for Editing Cost Adjustments

         the cost adjustment cannot be edited if it has been linked to a PO

         the Product and the Adjustment Units cannot be changed

To edit a cost adjustment row

         While editing a purchase invoice, on the Cost Adjustments tab select the cost adjustment row you want to update.
Click Edit Row.
The Edit Cost Adjustment window opens.

         Make changes as needed.

Tip

You may want to click Reset when changing the Cost Adjustment/Unit or Quantity as agrē tries to be helpful by keeping the Cost Adjustment Total constant.

         Click Save to save the changes to the Cost Adjustment row.
The Edit Cost Adjustment closes.

         Once all changes have been made, click Save to save the updated purchase invoice.