Example of Acquisition Cost Adjustment With Match Option Set to Order
This example illustrates the accounting entries for an acquisition cost adjustment when the match option is set to Order in the purchase order schedule.
Let's consider a purchase order with partial receipt and a corresponding invoice with price variance. The table here lists the transactions.
| Transaction Date | Document | Quantity | Unit Price | Total Amount |
|---|---|---|---|---|
| 1/17/2023 | PO 01 | 2000 | 900 | 1,800,000.00 |
| 1/18/2023 | RC 01 | 1500 | 900 | 1,350,000.00 |
| 1/18/2023 | Deliver - RC 01 | 1500 | 900 | 1,350,000.00 |
| 1/31/2023 | INV 01 | 1500 | 1000 | 1,500,000.00 |
Also, you've opted in to the Calculate Acquisition Cost for Purchase Order Transactions with Enhanced Cost Processing feature.
After you run the cost processor, these entries are created in Receipt Accounting.
| Transaction Type | Accounting Line Type | Document | Dr. | Cr. |
|---|---|---|---|---|
| Receipt | Receiving Inspection | RC 01 | 1,350,000.00 | |
| Receipt | Accrual | RC 01 | 1,350,000.00 | |
| Invoice Price Adjustment | Receiving Inspection | INV 01 | 150,000.00 | |
| Invoice Price Adjustment | Invoice Price Adjustment | IINV 01 | 150,000.00 |
These entries are created in Cost Accounting.
| Transaction Type | Accounting Line Type | Document | Dr. | Cr. |
|---|---|---|---|---|
| Delivery | Inventory Valuation | RC 01 | 1,350,000.00 | |
| Delivery | Receiving Inspection | RC 01 | 1,350,000.00 | |
| Delivery | Inventory Valuation | INV 01 | 150,000.00 | |
| Delivery | Receiving Inspection | INV 01 | 150,000.00 |
As you can see, the entire invoice amount is absorbed over the net delivered quantity rather than the ordered quantity on the purchase order.
Let's consider few more transactions to fully receive the remaining purchase order quantity. This time the invoice doesn't include any price variance.
| Transaction Date | Document | Quantity | Unit Price | Total Amount |
|---|---|---|---|---|
| 2/05/2023 | RC 02 | 500 | 900 | 450,000.00 |
| 2/05/2023 | Deliver - RC 02 | 500 | 900 | 450,000.00 |
| 2/07/2023 | INV 02 | 500 | 900 | 450,000.00 |
After you run the cost processor, these entries are created in Receipt Accounting.
| Transaction Type | Accounting Line Type | Document | Dr. | Cr. |
|---|---|---|---|---|
| Receipt | Receiving Inspection | RC 02 | 450,000.00 | |
| Receipt | Accrual | RC 02 | 450,000.00 |
These entries are created in Cost Accounting.
| Transaction Type | Accounting Line Type | Document | Dr. | Cr. |
|---|---|---|---|---|
| Acquisition Cost Adjustment | Receiving Inspection | INV 01 | 37,500.00 | |
| Acquisition Cost Adjustment | Inventory Valuation | INV 01 | 37,500.00 | |
| Delivery | Inventory Valuation | RC 02 | 450,000.00 | |
| Delivery | Receiving Inspection | RC 02 | 450,000.00 | |
| Delivery | Inventory Valuation | INV 02 | 37,500.00 | |
| Delivery | Receiving Inspection | INV 02 | 37,500.00 |
As you can see, the following has happened:
-
The receipt quantity and invoice quantity remains same so we see no change in the acquisition cost as we have already booked inventory for both the receipts.
-
The difference in invoice price variance is moved out of inventory in relation to the first receipt.
-
Inventory value is updated based on the receipt quantity at purchase order price and the invoice price variance.
On the Review Transaction Costs page, you can track each purchase order price events.