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The valuation of a goods receipt for a purchase order is based on the idea that the invoice price is more exact than the purchase order price.

When the vendor sends the invoice for a specific delivery, the value invoiced is considered a more up-to-date price than the one set in the purchase order when it was created, may be a few months ago.

 

Therefore, we distinguish two ways in which the value of the goods receipt can be calculated:

 

.- When the goods receipt is posted before than the invoice receipt:

 

Generally, we receive the invoice after the goods. Consequently, the value of the delivery is not known at the time of goods receipt. In this case, the value calculation is based on the purchase order. The value of the goods receipt is calculated based on the quantity received and the net order price. 

 

.- When the goods receipt is posted after the invoice receipt:

 

If an invoice has been posted for a purchase order before the goods are received, the value of the delivery is known at the time of goods receipt. In this case, the value calculation is based on the invoice. The value of the goods receipt is calculated based on the quantity received and the invoice price or the clearing value. If the invoice was for only part of the quantity, only the actual quantity invoiced is valuated at the invoice price at goods receipt. The remaining quantity is valuated at the purchase order price.

 

 

This logic is applied in the system in the following way:

 

At the time of the posting of the goods receipt we always compare the goods receipt quantity posted so far against the invoiced quantity posted so far.

If the quantity we are receiving has not been invoiced yet, then the valuation will be made according to the Purchase Order Net Value:

 

WRX = Quantity in the posting x (Purchase Order Net Value / Ordered quantity).

If the quantity we are receiving has been invoiced already, then the valuation will be made according to the Clearing value of the invoices:

WRX = Quantity in the posting x (clearing value * – goods receipt value) / (invoiced quantity – goods receipt quantity).

 

(NOTE: The clearing value is not the invoiced value! (*) . In Goods receipts we work with the clearing value of the invoices and not with the invoiced value. The clearing value of the invoice is the value posted to the WRX clearing account in the corresponding accounting document. The clearing values can be seen in the Purchase Order History of the item, selecting the view “Clearing value”).

 

 

We can consider the following case:

 

Purchase order for material A of 10 pieces with a net price of 1 EUR each.
Purchase order net value: 10 PC x 1 EUR/PC = 10 EUR.

 

 

CASE 1) A goods receipt of 5 PC:

 

This is our first action. We have not received or invoiced anything so far:

 

Goods receipt quantity posted so far: 0 PC.

Invoice receipt quantity posted so far: 0 PC.

Since the 5 PC that we are receiving have not been invoiced yet, they are valuated according to the Purchase order net value:

WRX = 5 PC x (10 EUR / 10 PC) = 5 EUR.

CASE 2) An invoice for 4 PC is posted with a value of 6 EUR.

CASE 2.1) After the invoice, we post a goods receipt for less quantity than invoiced, 3 PC.

 

This goods receipt is our second action:

 

Goods receipt quantity posted so far: 0 PC.

Invoice receipt quantity posted so far: 4 PC.

The 3 PC that we are receiving now have been invoiced already.

These 3 PC are valuated according to the clearing value of the invoice (since the invoice is a more up-to-date price):

WRX = 3 PC x (6 EUR – 0 EUR / 4 PC – 0 PC) = 4,5 EUR.

CASE 2.2) After the invoice, we post a goods receipt for the same quantity than invoiced, 4 PC:

 

This goods receipt is our second action:

 

Goods receipt quantity posted so far: 0 PC.

Invoice receipt quantity posted so far: 4 PC.

The valuation logic is the same one as before, but we can also consider that we need to clear completely the value posted to the GR/IR clearing account.

WRX = 4 PC x (6 EUR – 0 EUR / 4 PC – 0 PC) = 6 EUR.

 

CASE 2.3) After the invoice, we post a goods receipt for more quantity than invoiced, 5 PC.

This goods receipt is our second action:

 

Goods receipt quantity posted so far: 0 PC.

Invoice receipt quantity posted so far: 4 PC.

Of these 5 PC that we are receiving now, 4 have been invoiced already, so they are valuated according to the clearing value of the invoice. The remaining unit which has not been invoiced yet will be valuated according to the Purchase Order net value, so WRX will be the sum of:

4 PC x (6 EUR – 0 EUR / 4 PC – 0 PC) = 6 EUR.
1 PC x (10 EUR / 10 PC) = 1 EUR.
Total: 5 PC valuated at 7 EUR.

 

Just a further remark about the valuation procedure:

 

When we work with the Purchase Order Net Value, we need to consider that many times this is a rounded value.

 

As an example:

We create a Purchase Order of 1 PC with a price of 1,25 EUR per 100 PC.

Under the “Delivery” tab we flag the “Unlimited” overdelivery indicator to allow the reception of 100 PC.

No invoices are posted. The Goods receipt of 100 PC is the first follow-on document created. How is this valuated?

 

The valuation is carried out according to the Purchase Order Net Value:

 

Purchase Order Net Value = Purchase Order Quantity x Net Price.

 

Purchase Order Net Value = 1 PC x 1,25 EUR / 100 PC = 0,0125 EUR.

 

This value is rounded to the two decimal places of the currency EUR as 0,01 EUR.

 

We can already see this rounded value in the item conditions of our purchase order item:

 

image

 

 

Our goods receipt of 100 PC would be valuated according to this rounded value:

 

WRX = Quantity in the posting x (Purchase Order Net Value / Ordered quantity).

 

WRX = 100 PC x (0,01 EUR / 1 PC) = 1,00 EUR.

 

Therefore, for a goods receipt quantity of 100 PC, a total amount of 1,00 EUR will be posted and not 1,25 EUR, as we might expect at a first sight.

 

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  1. K Naagsekhar
    Excellent. It should definately helps in increasing our knolwedge levels .. Plz Plz keep Posting MIS related Inventory related articals also.
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