Correcting a wrong cost receipt

A wrong cost receipt error occurs when you receive a product during Purchase Receipt of Inventory Entry with an incorrect cost. The wrong cost may have been input during order entry or it could happen during receipt. Typically, warehouse personnel should not correct this error. Their function is to properly receive the product and quantities. Often warehouse personnel do not know, and should not be concerned with, the cost of the items coming into inventory. Buyers should ensure the accuracy of costs, and correct cost errors when they are discovered, especially if you are using Average Cost.

Example 1

Your warehouse personnel receive inventory on a purchase order for item 1-004, with a quantity of 100, ordered at a cost of $10 each. The actual price for item 1-004 from the vendor is $11 each.

After warehouse personnel update the system with the quantity of 100 for product 1-004, the inventory is updated by the system as if 100 of product 1-004 had come in at $10 each. Warehouse personnel are notified by the system to set aside a certain quantity to fill existing customer back orders and to stock the remaining quantities.

In this example, the inventory is re-averaged by the system based on receiving 100 at $10 each. If there had been existing inventory quantity of this product of 50 at $8 each, the new average inventory value would be 50 at $8 + 100 at $10 = 150 at $9.33.

When the Accounts Payable department receives the invoice from the vendor, the department costs the purchase order at $11.00 for 100.

Inventory is checked by the system to see if there are still 100 of this product on hand. If so, the average inventory is adjusted by the system for 100 by the $1.00 difference. If there were only 75 remaining on hand, the inventory would be adjusted for the remaining 75 for the $1.00 difference, and then an adjustment is posted directly to cost of goods sold in the general ledger for the remaining 25 for the $1.00 difference.

Until the Accounts Payable department has costed the vendor invoice and corrected for the $1.00 difference, any orders placed reduce the inventory by the $9.33 value, thereby falsely reflecting the margins.

Example 2

During receiving, warehouse personnel accidentally specify the quantity in the price field. If you are using Average Cost, you should correct the error before the invoice is received and processed in Accounts Payable.

Use these instructions to correct a wrong cost receipt.

Select Product > Entry > Maintain Cost.
Correct the average cost.
Before updating, add this internal note to the purchase order: Follow-up task: You must reverse the correction after you receive and cost the invoice. Reverse the correction from Product Maintain Balance Entry. If you do not reverse the correction, General Ledger will be out of balance because AP Costing will also correct the costing error from Purchase Receipt of Inventory Entry.
You can use the Notes context application in Infor Ming.le to create a Secured note attached to this corrected PO receipt. You can view the note in the Notes pane in the Context Apps panel.