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[Proposal] Accounting for internal transfers within the same company

Hello Community,

Earlier this year I made an enhancement via the following PR https://github.com/frappe/erpnext/pull/20083 which allowed users to make internal customers and suppliers within the same company and issue GST compliant invoices for stock transfer within the same company.

I are making some further enhancement in this scenario via this PR which has some accounting implications and would like the community’s feedback on this. The changes that this PR intends to make are as follows.

1. User can define internal-transfer account which can be used for internal stock transfers user has not defined any account in the transaction

1. Default Internal transfer account in company master

2. Internal transfer account selection in transaction

2. Accounting Implications on making internal transfer sales invoice

  • Stock is transferred from warehouse Test Warehouse P (Account: Central Warehouse-GTPL) to In Transit Warehouse - GTPL (Account: Stores-GTPL)

    Item rate - Rs 500
    CGST - Rs 45
    SGST - Rs 45

  • No Income will be booked or party account (Debtors Account) will be debited on posting such an invoice. Only tax and accounting entry for stock will be posted.

GL Entry for Sales Invoice

3. Accounting implications on internal transfer purchase invoice

  • Stock is transferred from warehouse In Transit Warehouse - GTPL (Account: Stores - GTPL) to Finished Goods - GTPL (Account: Finished Goods)

    Item rate - Rs 500
    CGST - Rs 45
    SGST - Rs 45

  • Similarly no expense will be booked or party account (Creditors Account) will be credited, just stock and tax entries

GL Entry for Purchase Invoice

For more info on how to create Invoices for internal transfer refer the below links:
https://docs.erpnext.com/docs/user/manual/en/stock/articles/material-transfer-from-delivery-note
Same procedure can be used for purchase and sales invoices

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Hi @Deepesh_Garg,

Is this for internal (1 company) or inter-company (2 companies) ?

If internal (as stated by the post title), does the moving between warehouse is enough? No invoice involved.

If inter-company (as in the explanation itself), is this for transfer pricing practice?

Could you elaborate on the use case? When is it necessary to have VAT invoices within the same company?

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This is for internal transfer (1 company). In India you are liable to issue a Tax Invoice and generate E-way bill even if you are transferring stock for one warehouse to other within the same company.

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Maybe you can change these word as not to confuse other readers?
Perhaps to inter-warehouse?
Because I think the term inter-companies is used for between companies registered in company doctype in ERPNext.
Thank you.

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In India you have to issue GST Tax Invoice even for stock transfer between warehouses of the same company. This enhancement doesn’t interfere with any of the existing flows and inter-company (between 2 companies) invoices can still be created as they can be done now. This just provides user one more functionality where taxes has to be applied on stock transfers. All these functionalities already exists. The only change my PR makes is not booking income and expenses on posting of such transactions

What if the warehouses have account codes?

I didn’t get your question, can you please elaborate

Warehouses can be assigned Chart of Accounts account codes. (Stock Items do not have account codes.) In internal transfers if warehouses have different account codes, general ledger entries is generated even for stocks with the same item code. Does your proposal consider this?

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Deepesh
I would recommend call this intra-company warehouse transfers

Yes, it is considered. If you refer the GL entries I have posted above my warehouses have different accounts linked to them. So on submitting the transaction balance is transferred from source to target warehouse’s account.

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For Internal Transfer (Sales Invoice) , the GST (IGST) reflects in the GSTR3-B report & GST Sales Register, but NOT in GSTR-1 .
is that a bug or some configuration issue ?