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Example documentationPosting for Canceling Documents with FIFO Items Locate this document in the navigation structure

 

Due to the accounting principles of the FIFO valuation method, canceling a document with FIFO items may trigger a special posting: if the document contains FIFO items whose warehouses are different from those in the base documents and the item costs in the warehouses are different, the price difference account and COGS (cost of goods sold) account cannot be reverted to the original balances by cancellation.

Prerequisites

On the Basic Initialization tab of the Company Details window, you have selected the following checkboxes:

  • Use Perpetual Inventory

  • Manage Item Cost per Warehouse

Procedure

  1. A FIFO item F001 is received into two different warehouses with different prices (costs).

    Warehouse

    Price

    Quantity

    WH01

    USD 5

    10

    WH02

    USD 1

    10

  2. Create a return for item F001.

    Warehouse

    Price

    Quantity

    WH02

    USD 50

    2

  3. Copy the return fully to a delivery but change the warehouse to warehouse WH01.

    Posting

    Account

    Debit

    Credit

    Inventory Account

    $ 10

    Price Difference Account

    $ 8

    Cost of Goods Sold Account

    $ 2

  4. Cancel the delivery.

    Posting

    Account

    Debit

    Credit

    Inventory Account

    $ 10

    Cost of Goods Sold Account

    $ 10

In step 3, the system revalues item F001 by its cost in the warehouse in the target document instead of using its cost in the warehouse in the base document. In step 4, as there is no price difference for item F001 in the same warehouse WH01, the system credits additional USD 8 to the COGS account.