Using stocking type "S" & 07 cost zero for tracking inventory for non-stock items

[TG Yoon]

Using stocking type \"S\" & 07 cost zero for tracking inventory for non-stock items

Hi all,

I am currtntly supporting an E1 implementation for a Korean customer. The customer wants to track inventory transactions of their equipment maintenance parts but does want to have the cost of purchase for the items debited as expense at the point of purchase.

My suggestion was to setup the standard costs for those items zero and have the AAI for the purchase price variance to point to the expense account. Thus, I wanted to have the system realize the expense at the point of purchase in the financial accounting system and let the customer track the inventory transactions of the no value items using item ledger.

But the accounting team of the customer company is saying that such practice is not normal.

In my opinion, it is OK as far as the financial accounting system has posted the expense at the point of purchase.

If anyone in the list has experiences liek this one, please let me know how you can defense this kind of use of standard cost of zero for non-stock items.
Besides, if anyone has any other good options, please let me know.

Thank you for your help in advance.

TG Yoon
[email protected]

 

[clmates]

Re: Using stocking type \"S\" & 07 cost zero for tracking inventory for non-stock items

Hi

Perhaps their accounting practices are similar to the spanish ones.

Here, in Spain do not post Purchases to the inventory accounts, but to the expenses ones. so the standard operation for JD Edwards, is to use standard cost and post to the expense acount for all items.

Regarding the inventory postings for the purchasing transactions an automatic distribution, or a customization to also post to the inventory account is needed.

HTH

 

[Sef]

Re: Using stocking type \"S\" & 07 cost zero for tracking inventory for non-stock items

Hi TG Yoon

From a system perspective there is nothing wrong with your suggestion. I have a client who does exactly the same with promotional items. 07 cost = 0 and 08 cost = purchase cost
How do you issue the goods? Through an inventory issue or on a maintenace WO?

The question remains as to what is an acceptable accounting practise which may vary by the type of product you are expensing and may vary from country to country

 

[TG Yoon]

Re: Using stocking type \"S\" & 07 cost zero for tracking inventory for non-stock items

HTH,

Thank you for the reply.

In my personal opinion, using the AAI to refer to expense accounts for the purchase price variance for the items that the customer wants to treat as non-stock items for acounting purpose means that the customer is treating those items as non-stock items in policy.

But there is a possibility that the tax office might say that the practice is not proper. Have you ever confronted that kind of situation with your customers ?
If you have had, your experence would be of great help for me.

Thanks

 

[TG Yoon]

Re: Using stocking type \"S\" & 07 cost zero for tracking inventory for non-stock items

Hi Sef van den Nieuwelaar,

Thank you for the reply.

We are planning to issue the spare parts using maintenace work orders of E1.
Because the maintenance team at the customer site wants to track the usage and inventory status of the spare parts, they want to issue those parts using work orders and this is for the purpose of managerial accounting and internal cost distribution. Actually, they are planning to attach actual costs to the standard costs after a while when they are ready to control the inventory properly. It means that this arrangement is an interim solution.

If you have any firther information that you can share regarding to the justification or defense in terms of tax accounting and financial accounting, please share it with others.

Thank you again

 

[clmates]

Re: Using stocking type \"S\" & 07 cost zero for tracking inventory for non-stock items

Hi.

Well, We are the customer

we do not account inventory transactions for now, but when we have tested our setup in Prototype for the inventory accounting, we keep going this way purchases AAI acounts to expenses for all items, and make the existences post with a distribution.

And we are audited all years without problem, but spanish accounting rules are mandatory for all spanish companies and says that you have to post to the expenses account by the amount of your purchase.