A couple of times a year (typically just after a go-live) we come across the situation where a user has posted a stock adjustment and realises that there’s no ‘undo’ button. Either the stock adjustment was posted with the wrong cost or warehouse, or, as in the case of the last issue we worked on, the user forgot to enter a cost on the receipt, which got posted at zero cost.
If your inventory costing method is Standard cost or FIFO + Fixed receipt, then you can simply post a reversing inventory journal. But if you’re using FIFO or Weighted average costing you’re going to notice that your reversing journal doesn’t exactly reverse the original journal.
The solution of course is Inventory marking – but that is the answer, what is the question? Let’s setup a scenario and explain the issue.
I’ve created an Item and I’m using FIFO costing. I’ve posted three inventory adjustment receipts:
The on-hand form shows that I’ve posted total receipts for 33, at a total cost of 365.00, giving me a current average on-hand (the ‘Inventory cost’) of [just a shade over] 11.06:
Now let’s try to reverse the middle journal posted on 2/9/2015 of 11 off at 11.00 each:
So, the first thing we notice is that the system doesn’t let me enter a cost price on an inventory journal issue line. The system’s displaying the site’s active cost (or the item master cost). When I setup my item I forgot to tick the ‘Latest cost price’ checkbox:
That checkbox would normally be checked for FIFO or Weighted average items. When it’s ticked, the system updates the item master cost based on each financially updated receipt (for instance a purchase order invoice or an inventory journal) – in effect the item master normally shows the last receipt cost price. Note to self – write a post about Item templates.
Anyway back to our journal – post it and check the inventory transaction:
So regardless of what’s showing on the inventory journal line, the system’s issued the 11 at [marginally more than] our average of 11.06, but what is often required is an exact reversal of one specific posting.
Let’s wind the clock back and try again. So here are our inventory receipts:
As before, create a reversing inventory adjustment journal:
Now, before posting the journal, let’s ‘Mark’ this issue to the receipt that we wish to reverse. Choose the Inventory > Marking menu option on the journal lines form:
The system displays the Marking form:
Our issue transaction is displayed in the top list grid, and our three receipt transactions are displayed in the bottom list grid. (You can also do marking from a receipt, in that case the sense of the two grids is simply reversed). When you select a record in the bottom list grid you’re given a bit more information – enough to ensure that you select the correct record for marking. Tick the ‘Set mark now’ checkbox:
The system’s set the Mark now quantity and the ‘Apply’ button is active. Obviously, we click ‘Apply’ and see:
Close the marking form and we’re ready to post our journal:
Checking our inventory transactions we can see that we’ve exactly reversed our issue:
In case you’re interested, the fact that the transactions are marked is recorded on the General tab of the inventory transaction display. Here’s the General tab of the original receipt:
And this is the reversing issue:
That’s pretty self-explanatory.
But of course you won’t have the luxury of time travel in your live system, however, all is not lost, because we can still apply marking after we’ve posted the reversing inventory adjustment. Select the issue and use the Inventory > Marking menu option:
As before, Mark the issue to the receipt you want to reverse. The difference now (because we’re marking after the posting and not before) is that we now need to run Recalculation. Go to Inventory management > Periodic > Closing and adjustment and click on the Recalculation button. I’ve setup a Recalculation just for my item:
Click OK and after some progress information I can see that I’ve done a Recalculation and the Settlements button tells me the value of the recalculation:
Now, again, my reversing inventory transaction has the correct value: