I’m having trouble getting an intended classification of the costs of the production when performing the “Finish” of the “Work Order” and I really would appreciate any guidance on this.
My current setup is a vanilla installation of ERPNext V12.7.1
As per my accountant requirement, I have to classify the cost of the items used in a production according to specific accounts on the Chart of Accounts. So I had to “break” the original “Expenses Included In Valuation” account into several others. I had used the field “Default Expense Account” on every type of item to assign those.
So far everything seems to be correct until I reach the end of the production. That last “stock transfer” for the “Manufacture” correctly reflects the debited amount for the items used on the intended “Cost Accounts” according to its “Accounting Ledger”. However those are not “closed” with an equal credited value when allocating the double entry for the “Finished Stock”. Instead a single register is credited for the account I had set for the “Default Expense Account” of the produced item.
If I remove that “Default Expense Account” for the produced item, ERPNext uses the global “Stock Adjustment Account” defined in the Company section.
Is there any way to achieve that “closing” of the cost accounts at the end of the production with an unmodified version of ERPNext? I guess posting a journal after every production can solve that, however it may seem quite impractical.
Just for an extra illustration here is what my accountant explained me I should get for the last stock movement at the end of the production:
Stock in Production… A+B: Credit
Cost of items type one… A: Debit
Cost of items type two… B: Debit
Finished Goods… A+B: Debit
Cost of items type one… A: Credit
Cost of items type two… B: Credit
Currently this is what I’m getting:
Stock in Production… A+B: Credit
Cost of items type one… A: Debit
Cost of items type two… B: Debit
Hi MrMauro - did anyone get back to you on this!? Did you find the way to solve it?
I am currently searching for a solution to same issue - trying to avoid any modifications to native ERPnext functionalities and, seeking to understand the reason why this “double” accounting is being done. Any advice would be very appreciated.
Cost of items type is kind of consumption (input) cost, Default Expense Account is kind of cost included in valuation (output) cost, accountant need/can do input - output reconciliation (balance to 0) at period end.
I’m sorry for the delay in answering your message.
Hope still this could be useful for you or someonelse.
Actually what @szufisher mentioned is the way to go. It took me a while to understand this, but if I recall correctly, this is what happens (Using the numeration for the account that applies to our company in Colombia):
On the “Stock Entry” document (of type ‘Manufacture’) the value of every item consumed goes to the debit of an account numbered 70* that represents the costs of goods, and whose number helps the accountant to differentiate among different types of resources. That account number is previously setup for every item.
All the other costs (like direct salaries, or direct costs like energy or so on) have also their own 71* account for production. In our case we currently enter those items and their values manually on the “stock entry” document as are mostly based on calculations from spreadsheets.
At the end, when the final “Stock Entry” document is posted, the resulting difference goes credit to another account 72* that represent the value of the production result.
Checking the ‘Account ledger’ for that document, in the case of the items consumed it shows a double entry per item: debit for the about 71* account, and credit for the 14* account (Normally that represents the inventory, an asset). Instead, the resulting item of the production uses the 72* (credit this time) against a debit for a 14* account on the finished inventory.
Ongoing production increases 70* and 71* accounts whose sum should match the sum of the 72* account.
When the account decides to close a period, they create a Journal that reflects that ‘consumption’ of the 72* accounts against the other 70* and 71*. Let’s say this is done at the end of the year and no items are on the production floor, then on the conciliation the final value of the accounts 70*, 71* and 72* should be 0.
I hope I have been clear, but if not, just let me know.