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This article explains how Inventory Accrual and Stock in Transit concepts are implemented in DEAR. It is recommended to understand the concepts in Processing a Purchase first before reading this article. 


Before learning about accrual, it is important to understand how costs are calculated in DEAR. In DEAR, cost is calculated upon invoice authorisation, while stock is added to the system when stock received is authorised. 

  • If the invoice is not authorised, or if the invoice does not have any cost or price defined within the system, the stock value would be 0 even if you have stock units in your inventory. 
  • If invoice is authorised, the stock value/cost will be recorded, even if no stock units have been received yet. 


This affects the balance sheet and will cause discrepancies between the balance sheet and the stock value. To tackle this situation we have inventory accrual feature. The feature functions as a 'float' account that holds the cost or the stock value until the other stage of the invoice/stock receiving is completed. 


Purchase orders can be processed Invoice First or Stock First. The default order is defined in General Settings → Purchase process customisation, but this can be changed from the Purchase document header. 

Inventory Accrual transactions and cost calculation take place when a Stock First Purchase is processed. (Goods Received, Not Invoiced).


Stock in Transit transactions are happening when an Invoice First Purchase is processed. (Goods Invoiced Not Received).


Table of Contents


Enable Inventory Accrual transactions

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This functionality only has any effect when Inventory Accrual setting is enabled. If Inventory Accrual is disabled, or mapping for relevant account is not provided, the functionality of Purchase won't change from no accrual implementation and only real costs will be accounted for.


To enable Inventory Accrual:

  1. Navigate to Settings → General Settings.
  2. Scroll to Purchase process customisation.
  3. Set Enable Accrued Inventory transactions to Enabled.
  1. When you enable this setting, you need to provide mapping for two accounts:
    • Inventory Accrual account (can be of class ASSET or LIABILITY).
    • Stock In Transit (can be of class ASSET).

Mapping for these two accounts can be done in both General Settings and Account Mapping. These accounts are not visible when Inventory Accrual is disabled.


Stock First - Goods Received, Not Invoiced - Inventory Accrual

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In this scenario, Cost movements with dates of stock received are added once Stock Received is authorised. For accrual cost calculation, DEAR uses purchase order cost value (when it is present) or Average Cost of product on the moment of Stock Received authorisation otherwise.


On invoice authorisation, Cost Movements with invoice date will be created identical to accrual cost movements but with negative amount. Also another system journals will be added to purchase identical to accrual journals but with negative amount. At the same time, normal cost movements will also be created based on normal cost calculation logic, while special accrual manual journals will be excluded from that logic.


In the example below, the purchase order cost value is $100.


Accounting transactions

Debit account

Credit account

Amount

Transaction Date

Inventory

Inventory Accrual (GRNI) Account

$100

Stock Received Date

Inventory

Inventory Accrual (GRNI) Account

-$100

Invoice Date

Inventory
Accounts Payable$100Invoice Date


Additional cost in Purchase order is NOT used in accrual cost calculation. To reflect accrual cost movements in transactions, special Manual Journals are automatically added to the purchase with Debit = Inventory account (Product/Default Purchase task levels) and Credit = Inventory Accrual account from mapping. These journals cannot be manually deleted and will be exported to Xero/QuickBooks regardless of Manual Journals authorisation status.


On Undo, special accrual journals will be deleted automatically and will be voided in linked accounting software. All cost movements can be verified in Product Movements tab.



Invoice First - Goods Invoiced, Not Received - Stock In Transit

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In this scenario when invoice is authorised, instead of creating transactions with accounts in invoice lines, all ASSET class accounts will be replaced with Stock in Transit account. When exporting this invoice to Xero/QuickBooks, same replacement will be done and in these systems Stock in Transit account will be displayed on the documents.


On stock authorisation, special manual journal is added to Purchase Manual Journals that can't be manually deleted. This journal has date of maximum stock received and Debit = Accounts from invoice, Credit = Stock in Transit and will be exported to Xero/QuickBooks without Manual Journals authorisation.


Accounting transactions

Debit account

Credit account

Amount

Transaction Date

Inventory

Stock in Transit (GINR)

$100

Stock Received Date

Stock in transit (GINR)

Accounts Payable

$100

Invoice Date


Once stock is authorised, you can't change account in invoice lines without Undo.

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