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How to enter Purchase Order for inventory already input using an Item Journal Entry?

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Posted on by RH

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We entered some inventory/item manually using an item journal at the time because we were not sure which vendor to use but needed to sell ahead of time.

The quantity has already been sold partially. We entered these items manually with location code, bin code, unit cost, lot#, etc. then sold as such.
Is there a way to link this manual receipt to a vendor now that we decided and to pay that vendor?

Also, is there a way to create a purchase order after the fact and link to this manual inventory entry and pay the purchase order/invoice without affecting the unit cost? (Would it double the entry?)

Thanks!

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Yi Yong 1,382 Super User 2024 Season 2 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

Hello,

Item Journal

Dr Inventory

Cr COGS-Adjustment

Purchase Invoice

Cr AP

Dr COGS-Adjustment

Net Impact - 1 (COGS-Adjustment is zerolised)

Dr Inventory

Cr AP

Sales Invoice

Cr Inventory

Dr COGS

Dr AR

Cr Sales

Net Impact - 2

Inventory is now 0 and transferred to COGS
RH 166 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

Would that leave a double entry in 110510 after selling if I also do a PI?

Also I did notice that the Adjustment account uses the COGS in CRONUS like you mentioned. Is there a reason for this?

Thanks!
Yi Yong 1,382 Super User 2024 Season 2 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

Hello RH,

Yes, your purchase invoice needs to be debited into 110510 to balance it out.

You should change the Inv. Adjustment account after the purchase invoice has been posted.

It will only affect future transactions and not past entries.

Do you have many other Item Journal entries with similar case? If not, you can change the Inv. Adjustment account right after you post the purchase invoice.
RH 166 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

It appears I have a credit sitting in my Inventory right now which is 110510.

And, a debit sitting in my COGS.

If I create a PI for 110510 it would balance 110510 and AP.

Then once it's sold, wouldn't it clear the COGS on its own? Thx so far for all your help, because if I change the Inv. Adjustment account now would past and future transactions be off?

As shown in sample:
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Yi Yong 1,382 Super User 2024 Season 2 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

Hello,

It will Dr 110510 and Cr COGS (your new GL).

Then in the Purchase Invoice, you will need to select the COGS (your new GL) to debit this account.

With the current setup,

your item journal entry will Dr 110510 and Cr 110510, resulting in no changes in Inventory GL amount but an increase of cost in your subledger.

When you generate an Inventory report with this current setup, you will find that the report will show your inventory value as $194,031.70 while your GL-110510 is showing 0.

In either setups, there is still no way to link the purchase order to an item journal entry.

It is a matter of accounting practice and correct recording of financial statement.
RH 166 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

Hmm OK so if I had used another GL then an item journal entry would enter there or? Also considering it's already done this way then if I changed the GL to one we decide would it fix it?
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Yi Yong 1,382 Super User 2024 Season 2 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

Hello RH,

Yes, the highlighted one is incorrect .

Inventory Adjustment GL should not be the same GL as the Inventory GL.

It should be pointed to a COGS account instead.

Below is an example of an inventory adjustment entry resource:
3 - How do you make inventory adjustment journal entries?

https://www.linkedin.com/advice/3/how-do-you-train-supervise-your-staff-inventory

However, I will suggest you check with your local auditor.
RH 166 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

It could be the GLs we are using/the setup:

This was the agreed upon setup that we've been using. Is this what you mean? Thanks.
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Yi Yong 1,382 Super User 2024 Season 2 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

Hello RH,

Yes, you are right to post into the Inventory GL in this case.
As I have highlighted earlier, the debit entry of the Purchase Invoice should goes in to the Inventory Adjustment GL of the item journal which turns out to be the Inventory GL.

It seems like the Inventory Adjustment is pointed to Inventory GL, this is not right though.

Adjustments from the Item Journal should hit into Inventory Account and COGS but the setup now is Debiting and Crediting into the same Inventory Account.
RH 166 on at

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How to enter Purchase Order for inventory already input using an Item Journal Entry?

It would appear that the missing entry is the Inventory and AP lines.
I have shown below if doing a regular PO the GL entries vs just Item Journal:
(All the rest match when doing Sales, it still hits COGS, for example.)
Only thing is that the item journal entry is not linked with any Vendor (which is another issue) and PO has 2 additional GL lines highlighted in yellow.

Only Item Journal:

This is why just for the financial part, I have done a Purchase Invoice which appears to add these lines to balance AP and Inventory:

Does this seem correct?