Why Receiving Non-Inventory Items in PO Will Cause General Ledger Inventory Account Out of Balance?
Q: We received an item that had been on a PO. The message we got was "The following item is not in the item file," but Receivings Processing did distribute the value of the item to both Inventory and the Receiving Accrual Account. Stock status shows none on hand. I wonder why Receivings Processing allowed this posting, because now the G/L balance in inventory is higher than what the Frozen Stock Status will figure based on counts of items times their average cost. This is such a small amount that we will just write it off, but I was curious that it could have happened at all. What do you think? Thanks,
A: The purchase order system is designed to allow purchasing of inventory items (item file) and non-Inventory items (i.e., a computer, copier, stationery etc.) in the PO module. In the PO Line Item Screen, you should change field, "5. Account No" from a regular Inventory account to a proper account (like fixed assets or expense accounts) if you order non-inventory items from a PO. The GL Account to distribute during receiving is decided from this field. If it is a real inventory item, instead of answering "Yes" to "Item not on file - Is this OK?," you should add the new inventory item to the Item Master File. Otherwise, the system is going to treat this as a non-inventory item.