Inventory Posting To Price Differences Account

By Samon

You are faced with the following situation: Price control MAP V / PO price 10$. Warehouse stock = 0/GR of 50 pc/GI = 10 pc/Invoice for 50 PC @ 20$. What is posted at the time of Invoice receipt?
GR/IR:500 / stock:400 / price differences:100 / to vendor liability:1000
or
GR/IR:1000/ to vendor liability:1000

GR/IR:500/stock:400/price differences:100/to vendor liability:1000 is correct posting.

As Stock of 40 is still vailable , the Difference amount will get posted to the Inventory account,.

Credit Vendor - 1000
Debit GR/IR - 500
Debit Inventory - 400
Debit Price difference - 100

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The difference of 400 will be adjusted in the 40 Qty.  As the Stock is not available only 40 is available, the difference of the 400 is posted into the Inventory account & the remaining amount will be posted to 

Cost (price) differences account under PRD.

The GR/ IR will be 500 only, this value will be picked up based on the PO only.

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GR is posted with material price 50. So GR/IR clearing account is credited with amount 500 and stock account is debited with amount 500.

Now consider that all the 50 quantity is issued before IV. It means stock is not available. In this case even if you change material price during IV, there is no stock available where you can load the difference. In this case, GR/IR clearing will be debited with same amount 500 (It is just a clearing account and is values are nullified at the time of IV). Vendor should get amount 1000. The difference amount 500 will go to Price difference account.

Now if 10 quantities are issued, 40 quantities are available on which you can load the amount. So 40 x 10 = 400 will be loaded on material (i.e stock account is debited with amount 400), GR/IR will be debited with 500 and difference 100 will go to price difference account.

How inventory differences are calculated?

Go through following process;

Physical Inventory Process: - 

1. Physical Inventory Preparation: - Following are the activities to be carried out in Physical Inventory Preparation phase.

- MI01/MI02/MI03 Create/Change/Display a Physical inventory document.
- MI01 - Blocking Materials for Posting
- MI21 - Print and distribute the physical inventory document.

A physical inventory document contains, among other things, the following data:

- The plant and storage location in which the count is to take place 
- When the count is to take place 
- Which materials are to be counted 
- For material handled in batches: which batches are to be counted 
- In the case of split valuation: which sub-stocks are to be counted 
- Which stock types are to be counted

2. Physical Inventory Count: - During the inventory count, all the materials being inventoried are counted and entered physically.

- Counting stocks
- Entering the result of the count on the physical inventory document printout

3. Physical Inventory Analysis: - 

- MI04/MI05/MI06 Enter/Change/Display the result of the count into the system
- MI11 - Initiating a recount, if necessary
- MI07/MI08 - Posting inventory differences
- MI20 Generating Difference List

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