Costing Negative Inventory

A negative inventory depletion transaction is a depletion transaction that drives the item quantity to a negative balance in the system even though physically the quantities did exist. The negative inventory feature is activated by selecting the Allow Negative Inventory check box on the Inventory Definition-Business Unit Options page.

Once PeopleSoft Inventory has shipped a negative inventory depletion transaction, you have options in PeopleSoft Cost Management on how to cost the transaction. There is no corresponding receipt or receipt cost to apply to the negative inventory depletion transaction. The Insufficient Qty Cost Option on the Cost Profiles page determines how the Transaction Costing process (within the Cost Accounting Creation process) applies costing to negative inventory transactions:

Field or Control Description

Always cost insufficient qty

Enables the Transaction Costing process (within the Cost Accounting Creation process) to cost negative inventory depletion transactions before sufficient quantity is entered into the business unit. For actual cost items, these costs can later be adjusted when sufficient quantity is placed in the Inventory business unit by putaway or adjustment transactions.

For example, if there are 10 units of an item available in the business unit and an order is shipped and depleted for 15 units, then the entire depletion transaction of 15 units is costed the next time the Transaction Costing process is run, even if this is before sufficient stock is placed in the business unit. Of the 15 units, 10 are costed using the existing stock on hand and 5 are costed using the current average, current standard, or last actual cost depending on the cost method employed.

Cost in Regular Mode Only

Enables the Transaction Costing process (within the Cost Accounting Creation process), run in Regular mode only, to cost negative inventory depletion transactions before sufficient quantity is entered into the business unit. These costs can later be adjusted when sufficient quantity is placed in the Inventory business unit by putaway or adjustment transactions.

If Transaction Costing is run in Mid Period mode, then the depletion transaction is costed up to the currently available quantity and the remainder is held.

For example, if there are 10 units of an item available in the business unit and an order is shipped and depleted for 15 units and:

  • The Transaction Costing process is run in Regular mode, then the entire depletion transaction of 15 units is costed. Of the 15 units, 10 are costed using the existing stock on hand and 5 are costed using the current average, current standard, or last actual cost depending on the cost method employed.

  • The Transaction Costing process is run in Mid Period mode, then the depletion transaction is split. 10 units are costed and 5 units are put on hold until sufficient stock is placed in the business unit.

Cost to point of zero quantity

Enables the Transaction Costing process (within the Cost Accounting Creation process) to split a negative inventory depletion transaction and cost part of the depletion transaction up to the currently available stock quantity. The remaining depletion transaction is held until sufficient stock is received.

For example, if there are 10 units of an item available in the business unit and an order is shipped and depleted for 15 units, then the depletion transaction is split by the Transaction Costing process. 10 units are costed and 5 units are put on hold until sufficient stock is placed in the business unit.

Don't cost if insufficient qty

Enables the Transaction Costing process (within the Cost Accounting Creation process) to delay costing the entire negative inventory depletion transaction until sufficient stock is received to cover the depletion transaction. This is the default setting.

For example, if there are 10 units of an item available in the business unit and an order is shipped and depleted for 15 units, then the entire depletion transaction of 15 units is put on hold by the Transaction Costing process until sufficient stock is placed in the business unit.

The current cost used to cost negative inventory depletion transactions depends on the Deplete Cost Method on the item's Cost Profile. The options are:

Field or Control Description

Actual Cost

The last actual cost received for this item.

Periodic Weighted Average

Not applicable. This deplete cost method cannot be used to cost negative inventory depletion transactions before sufficient quantity is entered in the business unit. The transaction is held.

Perpetual Weighted Average

The current average

Retroactive Perpetual Weighted Average

The current average.

Value at Current Standard

The current standard cost for the item.

If a current cost is not available for actual or average cost items, then the system uses the value entered in the Default Actual Cost field of the Define Business Unit Item - General: Common page.

The Accounting Line Creation process can process the costed depletion transactions and create accounting entries for the general ledger. This enables negative inventory depletion transactions to be reflected in the period end account balances rather then held up for receipt costs.

A negative inventory depletion transaction is costed by creating a dummy receipt row with a zero quantity. The depletion transaction is matched to this dummy receipt, which uses the new transaction group 001 (negative inventory) and is inserted into the costing tables. Once sufficient stock is received into the business unit, the negative state of the depletion can be cleared by using the Negative Inventory Resolver process.

Using the Negative Inventory Resolver

The Negative Inventory Resolver process has been added to the Transaction Costing process (within the Cost Accounting Creation process) to check for new putaway and adjustment transactions, and if sufficient quantities have been received into the business unit, the resolver process:

  • Applies the new receipt quantities to the previously recorded negative inventory depletion transactions. The resolver matches the negative inventory depletion transactions to actual stock received.

  • Creates adjusting accounting entries for items using the Deplete Cost Method of Actual Cost. The resolver creates an entry to reverse the cost previously recorded for the negative inventory depletion transaction and to record a new transaction at actual receipt cost. These changes flow to the Accounting Line Creation process where two accounting entries are created:

    1. A reversing entry to remove the depletion based on the last actual cost received before the negative state.

    2. An entry to record the depletion based on the actual receipt costs.

    For items using the Deplete Cost Method of Value at Current Standard, Perpetual Weighted Average, or Retroactive Perpetual Weighted Average, the resolver does not change the previously recorded cost for the negative inventory depletion transaction. The standard or average cost on record at the time of the depletion was used on the original depletion and is not changed when the resolver corrects the negative state by matching the negative inventory depletion transactions to actual stock received.

  • Inserts resolved negative inventory depletion transactions into a history table called CM_RESOLVE_HIST.

To resolve negative inventory, select the Resolve Negative Inventory check box on the Cost Accounting Creation process page. The process is launched within the Transaction Costing process after receipts have been processed, but before depletions.

Note:

The Negative Inventory Resolver process is optional. It is highly recommended that you use this process to resolve all negative depletion transactions so that reports and queries do not reflect negative states that have been resolved. The resolver does not impact the total on hand quantity. For costs, it only impacts the total inventory value for actual cost items.

Inquiries for Negative Inventory

Two inquiries are available to monitor the costing of negative inventory depletion transactions and the recalculations of the quantities and costs performed by the Negative Inventory Resolver process. These queries are CM_PENDING_RESOLVER and CM_RESOLVED_NEG_HIST and can be viewed using the Query Viewer.

  • The CM_PENDING_RESOLVER query returns negative inventory depletion transactions that have not been resolved.

  • The CM_RESOLVED_NEG_HIST query returns negative inventory depletion transactions that have been resolved and recorded in a history table CM_RESOLVE_HIST.

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