Inventory Transactions

Inventory transactions are used to account for inventory items moved to or from a specific warehouse, between locations within a warehouse, or between warehouses.

Purchases and sales cause inventory item movements, and the respective inventory transactions are generated by documents, such as purchase receipts and sales orders, and documents of other functional areas. Your company may also use direct inventory transactions—those not based on purchase or sales documents—such as issue transactions to remove damaged or expired goods from inventory. Because direct transactions are not standard operations, they should be accompanied by reason codes, which supply offset accounts and subaccounts and explain why these transactions were performed.

This topic contains an overview of the inventory processes and processing options applicable to documents of all types.

Types of Inventory Transactions

You use the following documents to record the inventory transactions performed:

• Receipts: To record the arrival of some quantity of stock items to inventory. Generally, inventory receipts are generated when purchase and transfer receipts are released; inventory receipts can also be created manually. For more details, see Inventory Receipt Processing.

  On the Receipts (IN301000) form, you can enter inventory receipts manually and view all the receipts that have been created in the system.

• Issues: To record the withdrawal of some quantity of stock items from inventory. Generally, inventory issues are generated in the process of shipment confirmation, but they can also be created directly.

  By using the Issues (IN302000) form, you can enter inventory issues manually and view all the issues that have been created in the system. For more details, see Inventory Issue Processing.

• Adjustments: To update the quantity of stock items in the warehouse (usually after physical inventory counts) and to update costs for items with various valuation methods. By using the Adjustments (IN303000) form, you can enter inventory adjustments manually and view all the adjustments that have been created in the system.

  An adjustment with a negative quantity that decreases the stock cannot be released if it would make the available for shipping quantity of an item negative. The Allow Negative Quantity check box can be selected or cleared on the Item Classes (IN201000) form for the item's class. In this case, the system displays an error message. Also, on the release of an adjustment with a negative quantity of a stock item, the system checks whether this item has allocations in sales orders, service orders, or production orders, as well as whether the item is added as a stock component to kit assemblies.

  If the stock item has an allocation in any of these documents and the quantity of this item that is available for issue will become insufficient if the adjustment is released, the system prohibits releasing the adjustment. It displays an error message with a recommendation to check the documents that the adjustment would have affected.

  You can review the list of allocations that can be affected by negative adjustments to stock item quantities by using the Allocations Affected by Inventory Adjustments (IN622000) report.

  Tip:

  If you want to release an adjustment with a negative quantity of a stock item, you can select the Ignore Item Allocations check box on the Financial tab of the Adjustments form.
• Transfers: To record the movement of stock items between locations within a warehouse or between warehouses. You use the Transfers (IN304000) form to enter or view inventory transfers.

  For more details, see Warehouse Locations and Single-Step Transfers: General Information and Two-Step Transfers: General Information.

• Kit assemblies: To update the quantities of kits that were assembled and items that were used as kit components. On the Kit Assembly (IN307000) form, you can enter or view kit assemblies (which have the Assembly type).

  If a kit is a stock item, this transaction increases the on-hand quantity of kits and decreases the on-hand quantity of its stock item components (if any). The cost of the assembled kit may exceed the total cost of its components if includes the cost of labor or other extra costs, added as non-stock item components. For more information, see Inventory Item Kits.

• Kit disassemblies: To update the quantities of kits and their stock components when kits are disassembled into components. On the Kit Assembly (IN307000) form, you can enter or view kit disassemblies (which have the Disassembly type).

  If a kit is a stock item, this transaction decreases the on-hand quantity of kits and increases the on-hand quantity of stock components (if any). The system generates an inventory adjustment to account for the extra costs that incur in the process of disassembling, if any.

Currency of the Inventory Transactions

For all inventory transactions, the base currency is used. Even if the original purchasing and sales documents were created in foreign currencies, the inventory transactions generated for them are always in the base currency.

Data Entry Options

The settings that can be used to manage the data entry of inventory documents are located on the Inventory Preferences (IN101000) form.

When a new inventory document is created, the system assigns it a reference number according to the numbering sequence specified for documents of this type in the Numbering Settings section of the form.

You can select the Hold Documents on Entry check box to make On Hold the default status. Then when you save a new inventory document, it will be assigned the On Hold status. To save it in another status, the user will need to click Remove Hold on the form toolbar.

To reduce the input error rate, you can select the Validate Document Totals on Entry check box. Then the user will need to review the transaction and manually enter a control quantity that is the same as the transaction quantity and a control amount that is equal to the transaction amount.

To make data entry for receiving operations more efficient with the help of barcode scanners, select the Automatically Add Receipt Line for Barcode check box to enable adding a line to receipt each time a new barcode has been scanned or entered manually.

Also, you can select the Add One Unit Per Barcode check box to indicate to the system that the item quantity on the receipt should be increased by one unit each time the item's barcode is entered into the system, manually or by using a barcode scanner.

Statuses

An inventory transaction can pass through the following statuses:

• On Hold: The transaction is a draft and may require further editing. With this status, the transaction cannot be released. If the Hold Documents on Entry check box is selected on the Inventory Preferences (IN101000) form, the system assigns the On Hold status to new inventory transactions by default. To change the status of the transaction, you need to click Remove Hold on the form toolbar and save the transaction.
• Balanced: This is the default status for new transactions if the Hold Documents on Entry check box is cleared on the Inventory Preferences form. The transaction still can be edited and can be released. If the Validate Document Totals on Entry check box is selected on the Inventory Preferences form, you must enter the control quantity and control amount to save the transaction in this status.
• Released: The transaction has been released and cannot be edited. Releasing the transaction updates the availability data.

Releasing Options

You can release inventory transactions one-by-one using the appropriate form: Issues (IN302000) Receipts (IN301000), or Adjustments (IN303000). In addition, you can release multiple inventory transactions by using the Release IN Documents (IN501000) form.

You can select the Update GL check box on the Inventory Preferences (IN101000) form to enable posting of the inventory transactions to the general ledger. If the check box is cleared, the system doesn't generate GL transactions on release of inventory transactions, and the general ledger will not be updated by the inventory transactions.

Upon release, the system takes the following actions:

• Updates the availability data according to the transaction type of each line.
• Updates the cost statistics for each item.
• If the updating of the general ledger is enabled, generates the general ledger transactions according to the transaction type of each line. You can view the balance of each inventory account and the list of documents that update the account on the Inventory Transactions by Account (IN403000) form.

Inventory Accounts Used for the Posting of Inventory Transactions

The system determines the inventory account to which it posts transactions with a stock item differently depending on whether it is receiving or issuing an item.

When the system is receiving the item to the warehouse, it uses the inventory account from the source selected in the item's posting class. In this case, it creates a new cost layer or updates an existing one (depending on the item's valuation method). The system posts transactions to the inventory account on release of the following inventory documents:

• A receipt on the Receipts (IN301000) form
• An issue on the Issues (IN302000) form with the Return or Credit Memo transaction type
• A kit assembly for a stock kit or a kit disassembly for a stock component on the Kit Assembly (IN307000) form

When it is issuing the item from the warehouse or adjusting the item's quantity or cost, the system uses the inventory account specified in an existing cost layer. No new cost layers are created when the system posts transactions to the inventory account on release of the following inventory documents:

• An issue on the Issues form with the Issue, Invoice, or Debit Memo transaction type
• An adjustment on the Adjustments (IN303000) form
• A transfer on the Transfers (IN304000) form, which is generated directly or on release of a transfer order on the Sales Orders (SO301000) form
• A kit assembly for a stock component or kit disassembly for a stock kit on the Kit Assembly form

Suppose that you have some units of a stock item received to inventory to cost layer 1 with inventory account 12100. Later you have changed the inventory account for the stock item to 12200. Then you have created and released an inventory issue or adjustment with this item. When a batch of journal transactions containing the item is generated and posted to the Inventory account, the system will issue the item from account 12100 specified in the existing cost layer 1. The system will not use inventory account 12200 from the source selected in the item's posting class.

If a stock item has been received to multiple cost layers with multiple inventory accounts, the system will use the inventory account for an issue or adjustment, starting with the earliest available cost layer in which the item has an on-hand quantity greater than 0.

Posting Options

The settings that can be used to manage the posting process for inventory transactions are located on the Inventory Preferences (IN101000) form.

The system assigns the batch numbers according to the numbering sequence selected in the Batch Numbering Sequence box on the Inventory Preferences form. The system immediately posts the GL transactions if the Automatically Post on Release check box is selected.

Also, you can use the Post Summary on Updating GL check box to control how transactions are posted. If you use the GL accounts that allow posting of summary values, you can select this check box. Then, the transactions in the batches will be grouped by account and subaccount pair and only the sum for each pair will be posted.

Transaction Reason Codes

You use reason codes, defined on the Reason Codes (CS211000) form, to indicate why direct inventory transactions have been created. Each reason code has a default account and subaccount specified, and these are used as the offset account and subaccount for the inventory transactions. You can specify the reason codes to be used as the default reason codes for inventory receipts, issues, and adjustments on the Inventory Preferences (IN101000) form.