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Total Value Difference (Out - In) - Stock Entry transaction for production Order

I’m new to manufacturing/ costing area. Can someone pls explain the below scenario.

I’ve a production order, which generates 2 stock entry transactions.

  1. Material Transfer for Manufacture
  2. Manufacture

In the manufacture transactions there’s a difference between Total Incoming Value & Total Outgoing Value. That’s creating a Total Value Difference (Out - In).

My query is, in which scenario, this difference occurs. And what should be the accounting for the same?

Uploaded the screenshot for reference.

Thanks
Uttaran

Hi,

Incoming Value- Goods value which you are providing for production .
Outgoing value- Finish product value after production.
Difference- Additional cost of production process which can be operation cost, electricity, Worker cost etc.

Hi, I have the same issue.

In my case (and I believe it is the same case for uttaran_kundu) there are no additional cost components for this stock entry (i.e. electricity, operation cost, worker cost, etc), we only include raw materials.

In the previous example we don’t use any additional operations or costs, therefore I guess both values, incoming and outgoing, should be equal (I use FIFO valuation rate). Why aren’t they?

The following (and more intriguing) issue comes in the accounting ledger. in this case, even with the value difference, I would expect the following:
1- Raw Material (Warehouse): $8775.37 Cr
2- Finished goods (Warehouse): $8518.20 Dr
3- Stock adjustment (Direct Expense): $257.12 Dr

But we get the following (the attached image is in spanish, so I’ll translate):
1- Raw Material (Warehouse): $8775.37 Cr
2- Finished goods (Warehouse): $8518.20 Dr
3- Cost of goods sold (Direct Expense): $8775.37 Dr
4- Stock adjustment (Direct Expense): $ $8518.20 Cr

This is going on for every manufacture stock entry. It has resulted in that both expense accounts have grown ridiculously (with the accumulation of production throughout the year), but even when they compensate each other, leaving only the “Total Value Difference (Out - In)” as a difference. they dont’ reflect reality.

@nabinhait, I’ve seen several posts regarding similar accounting challenges in the manufacturing transactions but no solution to my problem.

Do you have any advice? perhaps some configuration or default account is incorrect.

@JayRam, @kolotayo, @bkm, Do you have any advice?


Thanks to everyone in advance.

I found a solution to one of the problems (the difference in In and Out values):
You should "update rate and availability"before submitting the stock entry, this will recalculate costs (I found the solution in the following discussion).

The bigger problem (the accounting problem) remains. Please help.

I found a, not satisfying-temporary, solution to the accounting issue.

In the company settings I set the “Default Cost of Goods Sold Account”=“Stock Adjustment Account”.

Is this right? It doesn’t feel right to me. Where should “stock adjustments” or “stock reconciliations” be registered.

Thanks for your feedback.