Multiple production plan made for an FG with wrong item in the BOM


I have made multiple production plans for a Finished Good (FG) in different dates for different orders. Later I realized that one of the items in the BOM for that FG was wrong.

For example 20mm cap was used instead of 25mm cap in the BOM. In actual production, the correct item was used but in the ERP system due to the wrong item in BOM, consumption was made for wrong item. Now a total of say 15000 cap for 20mm cap was used incorrectly. How can I correct this without cancelling every single Order along with all the linked documents? I want to utilize those 15000 25mm cap and bring back the 20mm into the stock.


Any suggestions?

@JayRam Hi, in the past you had helped me clarifying an issue. I would like to know if you could help me here with this issue. All I want to do is to adjust the raw material that was incorrectly consumed without cancelling the submitted order and many other links docs. I also want to make sure the accounting impact it would make during the adjustment is correct.

Here is the scenario:
15mm Cap for an FG was supposed to be used but 20mm Cap was used in the BOM and manufacturing. Current stock for 15mm = 10,000 and for 20mm = 15,000 for example. If the correct item would have been used then the current stock should have been 15mm Cap = 5000 and 20mm Cap = 20,000. Please note the 5,000 caps that were incorrectly used were used in multiple orders in different dates in the past, say in May.
One option I know is to cancel all the orders of that FG that consumed the wrong item (20mm cap) along with all the linked documents which would include, production plans, work orders, stock entries, item posting entries etc and recreate the production plans with correct BOM. But this will be a long process as there are around 30 FGs in one order and for multiple orders I am talking about cancelling more than 100 of the above linked documents.
The other option could be through stock reconciliation but I am not sure if that’s the right approach and if that would correctly make the impact of stock as well as accounting entries. The way I am thinking about it is to make stock reconciliation entries closed to the actual production date by adding 5000 (used in multiple orders) to 20mm Cap and deducting 5000 from 15mm Cap and letting the system handle the price and all.
Is there another way to consume the material in such case?
Have you come across this issue? Any suggestions on how to overcome this issue? Thanks for your time in advance.

I am assuming you have perpetual inventory turned on.

Stock reconciliation is the right way to make the correction entries.

Change the BOM so that the next time around you use the correct BOM for issuing material to production and for manufacturing. But it’s too complicated to reverse all entries and redo them correctly.

A recap of your situation: Instead of 15mm cap, 20mm cap got included in the BOM and got manufactured. However, the correct item was used (as it usually happens on the shopfloor. After all the shopfloor was churning out products that your customers kept coming back for more even before you implemented ERPNext :slight_smile:) . Now what’s the effect of this error on your book of accounts. It’s a little complex. Let me illustrate:

Let’s day the valuation of the 15mm cap is Rs. 1. Let’s say the valuation of the 20mm cap is Rs. 2.

So when you manufactured 5,000 items where on ERPNext you used the 20mm caps, whereas the actual consumption for the 15mm caps. Let’s say you store both Caps in Stores - ABC.

Now for Stores - ABC you need to pass a Stock Reconciliation entry +5,000 20mm Caps, - 5000 15 mm caps. The net effect of that is Rs. 5,000.00 (as per our assumption of valuation) and you can park that into a Temporary Account for now (of any account for that matter). This is easy and fairly straight forward. Now your upstream Stores is all set.

But you have Rs. 5,000.00 sitting in that temporary account.

As you manufactured 5,000 items by using the 20mm cap on ERPNext (But 15mm cap in the real world), you increased the valuation of the Item that got manufactured by Rs. 1 per Item or the same Rs. 5,000.00 that’s sitting in your temporary account. So if you reduce the valuation of the manufactured item (through a stock reconciliation) by Rs. 1 per item and park the difference account in the same temporary account, it should square up all nicely, right? Well, not so fast!

If all the manufactured item is still in stock, yes, you could to that and it would all square up nicely (as long as you ensure that the valuation correction happens in each of the warehouses where the 5,000 products are sitting in).

But let’s say out of the 5,000 you made, you have sold 1,500. So these products that got sold is out of your inventory and the valuation of the sold item would have got credited to the Stock Account of the warehouse from which you made the stock transaction connected to the sale and the total valuation of the item would have moved to Cost of Goods Sold and got Debited there.

Now, your profitability got reduced by Rs. 1 per item (or Rs. 1,500.00 totally). The other 3,500 nos of the manufactured item is still in stock and could be in various warehouses.

So, if you want to really do as close to a perfect job, you should pass a Stock Reconciliation entry to reduce the valuation of the manufactured item by Rs. 1 per item (for the 3,500 you have in stock)and the difference account would be the same temporary account.

Then you pass a Journal entry to move Rs. 1,500.00 from the temporary account - Debit) and move it to COGS Credit.

If you notice, ultimately when all the 5,000 items are sold, the valuation of the item will hit COGS, ultimately. So, if you want to simplify things, you can move the Rs. 5,000.00 directly from the temporary account to COGS. Matter of fact, you can use COGS as the difference account in the stock reconciliation entry you passed to correct the quantity of the upstream warehouse (Stores - ABC).

Hope this helps.



Thanks for the very detailed explanation @JayRam. In my case, all of the items manufactured were sold (dispatched) to the customer as we manufacture products for third party clients and not sell by ourselves directly. In that case would I have to create these two entries only? Sorry, I am new to this but learning with all my heart.

  1. Create a stock reconciliation entry by adding 5000 to 20mm and subtracting 5000 from 15mm
  2. Pass a Journal entry for Rs 5000 (for 5000 qty dispatched or sold), right?

Also, please note that the temporary account that the system picked in the reconciliation entry by itself is “Stock Adjustment” and I think it’s fine to use that account, right?

Thank you so much again for your help and time. I really appreciate it.

This is what I would do:

Find out the Stock Transaction you used to flush out finished good inventory (the FG that used 20mm Caps on ERPNext when it used 15mm Caps actually)
The stock transaction on ERPNext that flushed out the FG stock would either be Delivery Note. Or Sales Invoice with Update Stock Checked. Click on view in that transaction and Click on Accounting Ledger. You will see an expense account (Cost of Goods Sold or equivalent) on the Debit side and a Stock Account on the Credit side.
Now start a stock reconciliation. If X nos of 20mm Caps were used on ERPNext when 15mm Caps were used on the floor, reduce the stock of 20mm Caps by X and increase the stock of 15mm by X. Use the warehouse where you store these caps - the same warehouse that you’d have issued or flushed out the 20mm caps on ERPNext. If you store the 15mm caps in a different warehouse use that warehouse.

ERPNext will automatically calculate the difference in valuations of these items in the difference amount. You need to assign a Difference account to charge this amount to. Use the same expense account that was charged in the FG transaction that flushed out the FG stocks.

Hope this helps.