Hi Everyone Earlier this year, I began reconciling account 2600 – Inventory Received, Not Billed. This account is used by the system to post bills for inventory received through POs, offset by the corresponding inventory receipts. The issue arises when POs do not reflect the actual cost of materials. Bills are recorded as invoiced amounts, while inventory is received at the PO-stated price. As a result, these variances were neither reconciled nor adjusted. We have since communicated with the purchasing department and are collaborating to prevent this issue going forward. Currently, I reconcile this account monthly and adjust discrepancies in inventory receipts as needed. However, in August, I recorded a significant adjustment JE to align accounts 2600 and 1200 for all variances accumulated up to that point (~285K). This adjustment is creating a variance between GL and Inventory valuation report balances, and the auditors are questioning why. Question : Will this discrepancy resolve itself as the inventory turns over? What is another solution to align the balances in the system?

No, it will not resolve. I suppose 1200 is your inventory account. 1200 will always be correct if you avoid journal entries on it. You have to always stick to inventory transactions. The variances are typically booked to a COGS account.

Yes 1200 is our inventory account. When you say 'stick to inventory' transaction you mean like inv adjustments along with the regular SO and PO?

yes, inventory worksheets too. transfer orders, inventory transit etc

Then what's the best way to record the balance between the PO/IR balance discrepancy? When the period is closed and I get a bill from a vendor that is 100 higher than what was recorded in the system?

Netsuite has its procedure to deal with this. The best way is to use the setting "match bill to receipt" on all items. Then the item receipt lines are linked to the vendor bill lines. There is an action called "Post vendor bill variances" which lets Netsuite do the booking for you, base on the variance accounts set on your item. If you don't go with that, I would book it as a cost/negative cost to a COGS account with 2600 as counter-account (?) together with a stock revaluation (if you haven't sold them yet).

Hi @Chris We have a lot of cases similar to that. We built a custom that check the price variance on vendor bill then adjust the sku avg cost using an inventory adjustment. We just do that because we use Average as costing method also works with lot numbered items that are not available on invenoty worksheet

@Luiz Morais How do you adjust 2600?

I use 2600 on adjustment and the lines will be items (1200). So if variance is positive it will Debit-1200 and Credit-2600, if negative other way around

alright!

another validation we do is if there is stock on-hand because sometimes the invoice arrives very late and the stock is sold out , in this case it goes to COGS using a journal. If stock is lesser the inbound, we do a partial adjustment and the difference goes to COGS

okey, do you date the inv.adj to the item receipt date?

if IR period is open, yes, otherwise first day of current period

okey, but if the period is closed, and you sold it during that period, you will have incorrect cogs. do you do 2 adjustments? if you do +1, -1 on the same adjustment, average cost goes bananas

if that happens we just post to COGS on current period, the COGS will remain incorrect for the closed period

@Luiz Morais How would you go about correcting this scenario? Here is an example: 1. January - PO12345 is created for 5 items @ $10 = $50 2. January – Inventory is received IR67890 – 5 items @ $10 = $50 – this is based of PO12345 and uses the price on the PO - creates a liability in 2600 for $50 and inventory asset in 1200 for $50 3. February - Bill is received for PO12345 for 5 items @ $12 = $60 – creates a debit in 2600 for $60 and a credit in AP 4. Now I have a variance in 2600 of $10 – I cannot open January to fix the IR67890 since my results have already been reported to the board – What do I do with that variance? I cannot use an item in my JE since then it would mess with inventory count – and the variance is in the cost – but as I record my JE to fix the 2600 and 1200 – the inventory valuation report does not pick that up since no item is associated with that amount. I do not think it will resolve itself, even with the inventory turnover, since no item is associated with it. SO should I record it as inventory adjustment? Is there a function to adjust inventory cost?

In this case, it will depend on stock qty in Feb. If stock for this product is zero at Feb 1st then post $10 to COGS using a journal If stock is 3, then post $2 to COGS using a journal and $6 to inventory using an inventory adjustment/worksheet If stock is 5 or higher then $10 to inventory using an inventory adjustment/worksheet