Handling PO Variances

If there is a variance between the amount of tagged inventory and the amount being billed by the vendor for the items, this variance should be posted to a PO Price or Quantity Variance account in the General Ledger during accounts payable invoice entry.  This will allow the operator to save the invoice.  The variance amount from the invoice can later be corrected or offset by adjusting the cost of items received at the incorrect price, or adjusting the quantity of any items that are received with an incorrect quantity.  As these adjustments are processed, they are posted to the appropriate general ledger variance account and they offset the postings that were made to the general ledger account during the accounts payable entry process.   If the items are sold (not in inventory) or have already been adjusted and the correct inventory cost adjustment cannot be made, the balance in the variance account causes the general ledger to show the correct total when financial statements are produced.

Please note that the variance procedures described above are discussed in detail in the procedures section of this document.

NOTE: The amount calculated by the Three Way Matching program and defaulted into the Inventory Liability distribution line may not be edited, as it is based on the actual transactions for the associated items.  If an item is received at an incorrect price or quantity, the variance procedures outlined later in this document should be used during and after invoice entry to correct the problem.  Changing the amount posted by the system can cause differences between the activity in the general ledger account and the associated sub ledger report and it is not recommended.


Saving the Invoice