Financial Processes in Inventory (2 of 8)

Last Updated on November 17, 2022 by maximosecrets

This is the second in a series of pages that examine the financial processes in the applications of the Inventory module. They demonstrate, using examples and screenshots, how the debit and credit GL account fields are derived. A summary is provided at the end of each page.

This series will include:

  1. Storerooms/Locations control accounts, GL defaulting in Item Master
  2. GL defaulting in Inventory – Adjustments
  3. GL defaulting in Inventory – Issues and Returns
  4. GL defaulting in Inventory – Transfers
  5. GL defaulting in Inventory – Kitting
  6. GL defaulting in Issues and Transfers
  7. GL defaulting in Inventory Usage and Shipment Receiving
  8. GL defaulting in Stocked Tools

This page will examine:

Inventory Adjustments – Current Balance

You cannot adjust the current balance of a rotating item; you will get the message “BMXAA1799E – A current balance adjustment cannot be performed on a rotating item.” 

The item must also be in Active state or a synonym at this level to add a balance using the Current Balance action, otherwise you will receive the message “BMXAA5471I – This action is not allowed since the item 1062 is in PENDING status”.

A balance record (INVBALANCES) can be entered using the New Row button in Inventory Balances table window. Here I have entered a balance of 10. The Bin number needs to be entered at the time you create the record as after saving it is read-only.

The transaction type is CURBALADJ. 

If the item is capitalized the INVTRANS GL debit account uses the Capital GL Account which was entered into the Inventory Cost table (INVCOST.CONTROLACCOUNT) and the credit account is null because the Shrinkage Account for capitalized items is null in Inventory Costs. The line cost will be zero for capitalized inventory items.

Note. When the Issue Cost Type is LIFO or FIFO then there is no INVCOST record. The control account and shrinkage account come from the storeroom and not the Inventory table.

To demonstrate that the Inventory Cost control and shrinkage accounts are used, I’ve temporarily changed the resource code to be 200 for the Control Account and the Shrinkage Account in INVCOST (the item has an average issue cost type) and now I’ve used the Current Balance Adjustment action and as you can see the Control and Shrinkage Accounts have used the values from the INVCOST record.

You can see that the GL Debit Account and GL Credit Account have used the new account codes modified on the Inventory Cost record, the new control account and shrinkage account. When there is a reduction in current balance the quantity is negative (-2:00).

If the Issue Cost Type is LIFO or FIFO, then:

Inventory Adjustments – Physical Count

A physical count can only be performed on non-rotating items. If your record is a rotating item, you get the error message “BMXAA1804E – A physical count adjustment cannot be performed on a rotating item.”

When you use the Inventory Adjustments action – Physical Count, you can perform this for a selected set of items. In this case we are performing a physical count for just one item, 1062 the Apple HDMI cable, the same one where we adjusted the current balance from 10 to 8.

In this case we did a count and there were 9 found at 05/05/20 11:15. This date and time happens to be before the point when I performed the current balance adjustment and actually before the date and time it was entered into the storeroom, and so it does not make sense, but then this is an illustration of the GL transactions.

The transaction type is PCOUNTADJ in INVTRANS object/table:

There is no effect on the general ledger as a result of performing a physical count, as both debit and credit GL accounts are the same. The effect occurs when you reconcile the balances.

Note. When the Issue Cost Type is LIFO or FIFO then there is no INVCOST record. The shrinkage account comes from the storeroom (LOCATIONS.SHRINKAGEACC) and not the Inventory table.

Inventory Adjustments – Reconcile Balances

The Reconcile Balances action in Inventory Adjustments is used to move the new quantity as a result of a physical count to the current balance field. The action can be performed from the List tab against a selected set of items. If there is no physical count to reconcile, after Maximo gives you a warning of how many records will be affected, then the Reconcile Balances action might appear to have processed and finished, but if there were no physical counts to reconcile, then nothing actually happened. You can demonstrate this by selecting all rotating items, across multiple storerooms and performing a Reconcile Balances action. As there are no physical counts for rotating items, there can never be anything to reconcile.

If there are physical count records to reconcile the Reconcile Balances dialog opens and this allows you to modify the Storeroom’s Control GL Account and Shrinkage GL Account. You might need to modify this if you have changed one of these GL accounts on an item, in either INVCOST or INVENTORY.

If the item has a cost type of LIFO or FIFO and the balance has increased then you must specify a Unit Cost and Cost Date, the cost basis in which the LIFO/FIFO quantity of item will be stored. You do not get this if the current balance will be decreasing but you may have more than one transaction record as a result, if the cost basis is not the same for the quantity of item specified. I will enter a Unit Cost of 50.00.

The transaction type is RECBALADJ in INVTRANS object/table:

Note. When the Issue Cost Type is LIFO or FIFO then there is no INVCOST record. The shrinkage account comes from the storeroom (LOCATIONS.SHRINKAGEACC) and not the Inventory table.

The result after the reconciliation is a Current balance of 9, the same as entered for the physical count. In the Inventory LIFO/FIFO Costs table window there is a quantity of 8 at a unit cost of $0.00, these would be issued first before getting to the quantity of 1 at unit cost $50.00. This is because the item has a FIFO (First In First Out) Issue Cost Type, the last of the quantity 9 to be issued will be the one entered on 06/05/20. 

Inventory Adjustments – Standard Cost

On Item 1063 – Apple MacBook Air, it is a rotating item that is not capitalized. We will use the Inventory Adjustments action to add a Standard Cost.

We have entered a standard cost of 75.00, it was previously 0.00 (cheap for a MacBook Air !).

The transaction type is STDCSTADJ in INVTRANS object/table:

Inventory Adjustments – Average Cost

On Item 1063 – Apple MacBook Air, it is a rotating item that is not capitalized. We will use the Inventory Adjustments action to add an Average Cost.

We have entered an average cost of 850.00 (that’s more realistic for a MacBook Air !), it was previously 0.00. The Cost % is calculated in this case. Next time around you could adjust by a percentage and the New Average Cost would be calculated.

The transaction type is AVGCSTADJ in INVTRANS object/table:

Summary – Inventory – Adjustments (INVTRANS)

There are five transaction types associated with inventory adjustments; current balance, physical count, reconcile balances, adjust standard cost and adjust average cost. Try to remember these rules:

Current Balance (CURBALADJ) and Reconcile Balances (RECBALADJ)

On the debit side (GLDEBITACCT):

On the credit side (GLCREDITACCT):

For FIFO and LIFO Issue Cost Type if the balance is increased you will need to provide a unit cost and date in the Specify Inventory Costs dialog. If the balance is decreased, then multiple transaction may occur.

Standard Cost (STDCSTADJ) and Average Cost (AVGCSTADJ)

On the debit side (GLDEBITACCT):

On the credit side (GLCREDITACCT):

Physical Count (PCOUNTADJ)

The debit side (GLDEBITACCT) and the credit side (GLCREDITACCT) are set to the same Shrinkage Account:

On Inventory Cost table (INVCOST), the control account, shrinkage account and cost adjustment account are all defaulted from the storeroom’s attributes, but they can be modified if you unhide them.

Leave a Reply

%d bloggers like this: