Difference between physical and financial cost amount

(0) Share

Report

Posted on by Tung Duong

242

Hi all,

I'm making a returned purchase transaction with an item, and the cost amount posted when the product receipt was posted is different with the one posted when the order was invoiced, although there was no transaction occurred with this item in between these 2 actions. Can anyone suggest any reason why this could happen?

Thanks in advance,

Regards.

*This post is locked for comments

I have the same question (0)

All responses (12)

Answers (1)

Ludwig Reinhard Microsoft Employee on at

Like (0)

Report

Hi Tung, What inventory model is setup in your item model groups for this item? Ludwig

Was this reply helpful? Yes No
Tung Duong 242 on at

Like (0)

Report

Hi Ludwig,

I'm using Weighted Average method for this item:

with the Include physical value in cost price option selected.

Regards,

Was this reply helpful? Yes No
Suggested answer

André Arnaud de Cal... 301,020 Super User 2025 Season 2 on at

Like (0)

Report

Hi Tung,

The physical amount is taken from the inventory cost principle. Which inventory model are you using for this item? Also this amount depends if you are returning with a return Lot ID or not. If you are using e.g. average it will have a cost price related to the on-hand at that time.

The financial amount is related to the unit price posted during the credit note. Indeed there can be a difference between the inventory cost and the return price.

Was this reply helpful? Yes No
Tung Duong 242 on at

Like (0)

Report

Hi Andre,

I recognize that the physical cost amount was calculated based on the current on-hand cost price at that time. However, the financial cost amount was different with the return price: the quantity was 1, the return price was 100,000 but the financial cost amount was 81,667...

Regards.

Was this reply helpful? Yes No
André Arnaud de Cal... 301,020 Super User 2025 Season 2 on at

Like (0)

Report

HI Tung,

It will be hard to tell without knowing all detailed transactions related to this item. Are there any miscellaneous charges? You can also try to run an inventory recalculation to see if this would correct the cost price. Probably test it in a copy environment first.

Was this reply helpful? Yes No
Tung Duong 242 on at

Like (0)

Report

Hi Andre,

Thanks for your suggestion. There was no additional charge in the transaction. I've rebuilt my customer's case with a new item (which has the same item model group with the last one) in the test environment as follows:

1. I purchased and fully invoiced 1 unit of this item with the price of 100,000/unit:

2. I created a new PO and received another unit for 50,000/unit

3. However, the price was not right and before invoicing this order line, I attempted to return the item (without marking order line) and add another line with the right price. I created another product receipt for these 2 new lines:

The physical cost amount of the deducted line (2nd line) was calculated based on the current on-hand cost price:

The 3rd line was physically posted using the unit price:

4. I posted invoice for all 3 lines:

However the financial cost amount for the returned line was quite strange:

After this, I also made an inventory recalculation for this item, but there was no adjustment to the cost amount. I don't know how the system got this number. Since it would affect the ledger, I want to know how this happened.

Any help would be great,

Regards,

Was this reply helpful? Yes No
Verified answer

Guy Terry 28,924 Moderator on at

Like (2)

Report

Hi Tung,

This is how the Weighted average costing model works. In the period, you have received a quantity of 3, with a total value of 250,000. And you have sold (issued, returned, whatever) one. The one you sold is valued at the average, which is 250,000/3 = 83,333.

If you want the return to be valued at 50,000, you need to use Inventory marking to mark the issue to the first receipt.

Was this reply helpful? Yes No
Tung Duong 242 on at

Like (0)

Report

Hi Guy,

Thank you for the explanation. Should've known it!

Regards.

Was this reply helpful? Yes No
neethukbabu 6 on at

Like (0)

Report

Hi Tung,

I am also facing the same issue. Financial cost amount is different from the physical cost amount. We are also using weighted avg costing model. Because of this difference, trial balance also showing some values. Please help me to sort this.

Regards,

Neethu K B

Was this reply helpful? Yes No
Guy Terry 28,924 Moderator on at

Like (0)

Report

Hi,

This is normal behaviour with the Weighted Average cost model. What scenarios do you have where this is causing a problem with the Trial Balance?

Was this reply helpful? Yes No