Currently, ERPNext recognizes the expense(cost of goods sold) upon delivery, that is, either via Delivery Note or update-stock checked Sales Invoice.
Everything works fine if you update stock via the invoice, but if you do it via Delivery Note, there is a catch in a particular scenario.
Lets go through the scenario:
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Create a Delivery Note, dated this month.
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Create Invoice against the Delivery Note
If you check the ledgers, you can see that expense is booked in the first month and income in the second.
Profit & Loss:
As seen, March shows only income(from the invoice) and no expense at all, as Delivery Note was created in Feb. If this happens around the end/beginning of fiscal years, yearly P&L is also affected.
The proposed (optional) change we would like to bring to this flow is:
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Upon submission of Delivery Note, if it isn’t invoiced yet, instead of the expense account, ledger will be passed into another account(Stock Issued But Not Billed - Balance Sheet account).
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Upon invoicing, we will cancel out the change in Stock Issued But Not Billed and book the expense.
This way, income and expense are booked in the same time period, making the flow IFRS complaint and P&L would show the correct value.
Also this proposed change doesn’t cover the reverse flow, ie, Sales Invoice first and Delivery Note later.
Drop in your thoughts!