Usually, the woroking of transfer Order is like when the preference to use for item cost as the transfer cost can be enabled by navigating to Set Up > Accounting > Accounting Preferences > Order Management tab. Under Transfer Orders, the user will see the Use Item Cost as Transfer Cost checkbox.
If this is enabled, the GL Impact of the Item Fulfillment and Item Receipt will be as follows:
- Item Fulfillment in the Source Location
Debit Inventory In Transit (Source Location)
Credit Inventory Account (Source Location)
- Item Receipt in the Receiving Location
Debit Inventory Account (Receiving Location)
Credit Inventory in Transit (Source Location)
The above scenario does not recognize gain or loss since the transfer is recorded at cost, with the Inventory In Transit account being a temporary holding account.
When this preference is disabled, however, the GL Impact will be the following:
- Item Fulfillment in the Source Location
Debit Revenue Account (Source location)
Credit Inventory Account (Source Location)
- Item Receipt in the Receiving Location
No GL impact since the inventory cost was transferred at 0.00 value
Since the effect of enabling this preference will apply to future transactions, there are instances when the user wants to reverse the wrong GL Impact of past transactions.
Solution
User may follow the following steps to adjust the GL Impact:
1. Remove the impact of the Revenue account in the Source location and post it to the Inventory In Transit Account
1. Enter a Journal Entry by navigating to Transaction > Financial > Make Journal Entry
Debit Inventory in Transit (Source Location)
Credit Revenue Account (Source Location)
2. Hit Save
2. Remove the inventory items posted with 0.00 unit cost in the Receiving Location
1. Navigate to Transactions > Inventory > Adjust Inventory
2. For the Adjustment Account, select Inventory in Transit
Note: This should be the same as the account used in the journal entry
3. For the Adjustment Location, select the Source Location
4. At the Adjustments tab add the following:
Line 1:
Item: Item
Location: Receiving Location
Adjust Qty By: – # of Units Transferred
Serial/Lot Numbers: If Any
Memo: To remove items transferred with 0 cost from (Source Location)
5. Hit Save
3. Add the quantity of inventory with the correct unit cost in the Receiving Location by creating adding Inventory Adjustment dated the next day
1. Navigate to Transactions > Inventory > Adjust Inventory
2. For the Adjustment Account, select Inventory in Transit
Note: This should be the same as the account used in the journal entry
3. For the Adjustment Location, select the Source Location
4. At the Adjustments tab add the following:
Line 1:
Item: Item
Location: Receiving Location
Adjust Qty By: +# of Units Transferred
Est. Unit Cost: Desired Unit Cost
Serial/Lot Numbers: If Any (following those entered in #2)
Memo: To add items transferred with correct unit cost from (Source Location)
5. Hit Save