Hi all, I believe the treatment of accounting quantity for inventory items is flawed. I'd like anyone with knowledge of this to review the following and see if I have misunderstood anything. If I do understand correctly, I'll create some Jira tickets in due course.
1. Why accounting quantity? ------------------------------------------ When inventory is received or shipped, there's an accounting transaction that debits the inventory on hand value and credits Cost of Goods Sold (COGS). There's more than one way of deciding what value is added to COGS. First and most obvious is the actual cost of the inventory item. But companies may prefer other strategies. OFBiz has the option of three others: average cost, first-in-first-out or last-in-first-out. There's a nice survey of *why* you might choose one of these at http://www.dummies.com/business/operations-management/choosing-an- accounting-method-for-the-cost-of-goods-sold-expense/, http://www.dummies.com/business/accounting/the-fifo- method-for-cost-of-goods-sold/, http://www.dummies.com/ business/accounting/the-lifo-method-for-cost-of-goods-sold/ Note that if you choose anything other than inventory item cost, the money amount transferred to the COGS account may be *different* to the cost price of the inventory items being shipped. When you choose FIFO or LIFO, the amount may have originated from a different inventory item, received at a different time. 2. Current situation in OFBiz ------------------------------------------ The cogsMethodId field in the PartyAcctgPreference entity is a enum with four possible values:COGS_INV_COST, COGS_AVG_COST, COGS_FIFO, COGS_LIFO.. The accountingQuantity field in the InventoryItem entity and accountingQuantityDiff in the InventoryItemDetail entity track the quantity of an item still "live" for the purpose of inventory valuation and COGS. In the service createAcctgTransForShipmentReceipt implemented in /applications/accounting/minilang/ledger/GeneralLedgerServices.xml (http://svn.apache.org/viewvc/ofbiz/trunk/applications/ accounting/minilang/ledger/GeneralLedgerServices.xml?view=markup#l1306) the accountingQuantity is always set to the same value as the quantity received (i.e. the same as the quantityOnHand) for a newly received inventory item regardless of the COGS method. When items are shipped, the service createAcctgTransForSalesShipmentIssuance will only reduce the accounting quantity if the COGS method is FIFO or LIFO (http://svn.apache.org/viewvc/ ofbiz/trunk/applications/accounting/minilang/ledger/ GeneralLedgerServices.xml?view=markup#l1127). I can't find anywhere else where the accounting quantity is reduced. With FIFO, when an item is shipped, inventory items for the product with a non-zero accounting quantity are found sorted from earliest to latest received. The quantity of the item shipped must be decremented from the accounting quantities, starting with the earliest. Similarly, with LIFO, items are sorted from latest to earliest, and the latest item or items are decremented. In other words, if you have chosen a COGS method of COGS_INV_COST or COGS_AVG_COST, the accounting quantity is meaningless and in OFBiz as of now, should be ignored. And yet, the Inventory Valuation report uses accounting quantity, regardless of the the COGS method (http://svn.apache.org/viewvc/ ofbiz/trunk/applications/accounting/widget/ReportFinancialSummaryForms. xml?view=markup#l535). In other words, the Inventory Valuation report is broken for COGS methods of COGS_INV_COST or COGS_AVG_COST. 3. What should happen ---------------------------------- I would argue that the Inventory Valuation report, and anybody else who cares, should always be able to trust the accounting quantity. For COGS_INV_COST and COGS_AVG_COST, maintaining the accounting quantity is simple - it should just match the quantity on hand. I would argue it should still be there, so the Inventory Valuation report works for COGS_INV_COST. No matter what the COGS method, the total accounting quantity should always be equal to the total QOH, regardless of the COGS method. In addition, the Inventory Valuation report needs to be redesigned for the average cost method. If you've chosen the average cost method, there is no point in listing different inventory items. All inventory items will have the same average cost, so I don't see the point in listing them individually. Rather, lines in the report should just have the product and the average cost. Jira tickets https://issues.apache.org/jira/browse/OFBIZ-5314 and https://issues.apache.org/jira/browse/OFBIZ-5283 have some relevance to this problem. Cheers Paul Foxworthy -- Coherent Software Australia Pty Ltd PO Box 2773 Cheltenham Vic 3192 Australia Phone: +61 3 9585 6788 <+61%203%209585%206788> Web: http://www.coherentsoftware.com.au/ Email: i...@coherentsoftware.com.au
