This type is a more in-depth correction involving selection of a specific receipt document (for a specific item) and updates a number of database figures and documents (including the receipt document). The total cost adjustment displayed is based on the received quantity and the difference between the original receipt cost and new receipt cost (including any adjustments present for the receipt). Weighted average cost will be adjusted when costs change. When sales have occurred using a weighted average cost that is being adjusted, the related documents (invoices) and cost of sales totals for the item, customer, and user are adjusted. A separate counter is kept in the branch totals table for cost corrections.

When updating documents (sales, etc.), cost corrections use a separate field in the document header table that is specifically for corrections. This is done so that the original document's costs are retained for reference and archival purposes. Links are created between the cost correction document and any documents updated by the correction.

Notes

The notes text-area can be used to add a descriptive note regarding each item cost correction. These are not document notes. Instead, notes are saved with each item and are listed below each item on the Item Cost Correction document. Up to 256-characters are allowed for each note. Notes are not required for processing. Notes currently only apply to Received Item Cost Corrections and not Receipt or Transfer Document Corrections.

Entering the Corrected Cost

After selecting a receipt document from the "item" drop down, you have 3 options for entering a corrected cost: correct unit cost, correct final cost, and correct extended cost.

What's the difference between the Correct U/C and Correct Final costs?

The "Correct U/C" is the "per item" cost before any adjustments. If this cost is chosen for entering a correction amount, any adjustments will be added to or subtracted from (depending upon the adjustment type) the cost to calculate a "new" final cost. Adjustments (and rebates) will not be included in the calculated extended cost figure.

When the "Correct Final" is entered by the user, instead, the amount entered should already include any adjustments as well as rebates. Any adjustment or rebate amounts from the original receipt will be backed out of the new "correct final" cost to display the calculated "correct U/C" and extended cost. If your company uses the Vendor Rebates feature and also adjusts costs based on the anticipated rebate, the correct final cost is reduced by both adjustments and rebates.

If the user chooses "Correct Extended" cost, they enter the extended cost for the item (quantity X unit cost) without adjustments (if adjustments are involved, they will be considered separately).

Total Receipt vs. Auto Cost Correction Amounts

After a user picks a cost type and enters an amount, the application does some calculations and two (2) figures are displayed as the result: total receipt correction and auto cost correction. The "total receipt" correction is the cost difference in dollars between the original receipt document and the new cost entered. The "auto cost" correction amount is the total "cost of sales" adjustment that will be made if the correction is processed.

Cost of sales is the cost of the goods sold in Point of Sale transactions. A correction is necessary for received goods if those goods have since been sold using a cost that the receipt affected. The correction must "fix" the cost used for those sales. When sales are processed, the cost of sales is based upon the weighted average cost of the items. Weighted average costs are re-calculated when goods are received (it's an average calculated by adding the weighted average value of goods currently in stock and the new cost value of the goods being received then dividing the resulting figure by the new total quantity).

Because existing weighted average costs are used to calculate any new weighted average cost, cost changes to a receipt can potentially update the costs on large numbers of documents. The more active the item or further in the past the correction is done, the greater the number of documents that potentially may need correction. For an example, if item XYZ has been received 4 times with 4 different costs and the oldest receipt cost is adjusted, all sales since that receipt could potentially need to be adjusted. This is because the existing costs would not have been correct each time the weighted average cost was re-calculated for the 3 subsequent receipts making the new weighted average incorrect each time.

Should the Costs Match?

Not usually. Although it's possible for the receipt correction and auto cost of sales correction amounts to match, this would be unusual. The "auto cost" correction amount is based on the item's sales activity which is likely to vary from the receipt document's correction total.

How can I tell what was affected by an "auto cost" correction?

There are a number of ways to do this. When cost corrections are processed, a document is created. The document will contain links to any Point of Sale transactions, etc. that were adjusted as a result of the item receipt correction. To view these, click on the Documents tool and then after locating the Cost Correction document, choose Links.

In addition, cost of sales corrections create ledger entries. Those users with access to General Ledger can use the Journal Entry activity to view the details (F5) associated with cost of sales corrections. This allows them to list and view the affected documents. The "inventory" system journal reflects cost of sales (and other) corrections.

A third option is to use custom reporting application, such as Crystal Reports® software, to locate correction documents. A large number of templates for uses such as this are available free on our web site.

What get's updated by the correction?

This correction will update documents that would have updated cost of sales such as invoices and charge returns. An item's weighted average is adjusted by the correction. In addition, cost of sales figures recorded for inquiries such as totals, customer (account), job, and the item are adjusted. When more than one branch location is involved with a sale of goods, cost corrections are done for the branch supplying the materials only.

Why doesn't an item's Last Receipt cost update after doing a Received Item Cost Correction?

Only the item's weighted average cost is adjusted when a receipt item type cost correction is done. There are a few reasons for this:

•The Receipt being updated is not always the most recent purchase, any receipt can be adjusted.

•Adders and/or rebates may be involved. Adders are included in an item's weighted average cost but not the Last Receipt cost. Applied adder amounts vary from one purchase to another, so it does not make sense to include them in the Last Receipt cost.

•Last Receipt and Market costs are provided primarily as a reference for purchasing. They are not used for updating cost of sales or for valuation purposes. The main purpose of cost corrections is to make sure that items will be sold or returned using the proper costs, or if they have already been sold/returned with the wrong cost, to correct the cost that had been used for those sales.

Do Received Item Cost Corrections Consider Rebates?

Yes, rebates are considered if the rebate was originally applied at the time the receipt was processed. Vendor rebate codes only adjust average costs based on the percentage assigned to the vendor and item IF enabled to do so (from the Purchase Orders tab in the Parameters form located under the Maintenance area's Database menu). Rebate amounts are determined by the difference between the original cost and final cost less any adjustments. The difference is assumed to be rebates.

Rebate information is stored with receipt records when present at time of receiving. This is done regardless of whether the vendor's rebate code indicates that cost adjustments to the average cost are to be applied. For this reason, a correction cost is only adjusted when an adjustment was actually applied regardless of the current rebate settings. Rebates only affect items' average costs. Items' last receipt cost is not affected and reflects the full cost before adjustments and rebates were applied.

Will the correction total for the documents always equal my "auto cost" amount?

The "auto cost" is a sum of all the correction amounts, but it is not necessarily a "net" amount of the correction. This sum represents a total of adjustments regardless of whether the particular adjustment is an increase or decrease in cost of sales. Charge return documents represent a reduction in cost of sales rather than an increase, and they can be affected by a cost correction. However, the amounts on a Charge Return type document are represented as positive figures rather than negatives ("cash" type returns are represented as negative figures and do reduce the "auto cost" amount). The inclusion of a charge return document in a correction can increase the "auto cost" correction but reduce the actual total correction applied.

Saving, Modifying & Processing

Once a cost correction has been specified for the selected item and receipt document, choose the F6 (Save) function. This will move the correction into the table (data grid) in the lower section of the form. Repeat this process for each individual correction. Saving a correction does not complete processing of the correction. Saved corrections can be modified (after selection via the data grid). When a previously "saved" correction is selected for modification, the Save (F6) function is changed and relabeled as "Modify." Saved corrections may also be deleted by selecting the data grid row and choosing delete (either press the delete key or choose "delete" from the alternate menu). Modifications and deletions can only be done while they remain in the Cost Corrections form or until the user chooses Process (F12). Choosing Cancel (F9), Menu (F10), or navigating back to another selection on the main form will clear/remove any "saved" corrections.

Saved cost corrections are not finalized until the user chooses the Process (F12) function. Only cost corrections that have been saved (those that appear in the grid) are processed (F12). This allows for entry, review, and processing of multiple corrections all at one time. Choose F12 (Process) once all corrections have been made. This will update the appropriate documents with the changes. All saved corrections that were processed will be listed on the same Item Cost Correction document together.