Quantity received is more than vendor invoice and shipments

Operator receives more than the correct quantity.  This situation is a bit more difficult to correct since the error may have affected more areas of the system.

Accounts Payable Department

      Confirm the amount actually received (physically and in the computer).

      Input the vendor invoice at the correct amount (the amount that actually should be paid for the items).

      Tag the inventory activity records that were created when the item was received with the incorrect quantity (to make sure that these records are cleared out of the unvouchered inventory account).  DO NOT adjust the amount that the computer automatically posts to unvouchered inventory when you hit the save key in the matching overlay.  Tag the entire quantity even if incorrect.

      Charge the quantity variance amount (the difference between the amount of the inventory transactions for the receipt and the amount being billed by the vendor) to the Purchasing Quantity variance account (this account should already be set up in your General Ledger).  The PO Quantity variance account is a special purpose account, normally set up in the cost of sales section of the income statement.  It is normally assigned an autopost so that the account can be posted to both from the Inventory Adjustment program and from the Accounts Payable program.  The account is posted to from accounts payable when there is a quantity variance, and then posted to again when the incorrect quantity  for the mis-received item is adjusted using the Inventory Quantity Adjustment program.  If you have over-received against an item, this account will normally be credited from within the AP Invoice Entry program.

      Have the inventory control department reduce the quantity of the item to the quantity actually received and to charge the adjustment to the PO quantity variance account.  The adjustment should offset the posting that was made from accounts payable when the receipts were tagged.

      Re-open the associated PO line and header if necessary for the amount that was received in error so it can be processed at a later date when the quantity is actually received.

PO Quantity Variance - Detailed Example

The following example illustrates the procedure.

1.) A PO is placed for an item with a quantity of 100 and a price of 100.00

2.) A partial shipment of 10 is sent out by the vendor and received by the warehouse. During the inventory receiving process, Qty 100 of the item is received at $100.00, instead of the correct quantity of 10 at a price of $100.00.  When item is received, the system

a.) Increases inventory qty on hand for the item by 100 and re- averages the cost of the item.  In this example we will assume that the item had a qty on hand of 5 units @ $100.00 before the receipt.

Old Value  5 units  @   100.00 =     500.00

Receipt     100 units @ 100.00 = 10,000.00

subtotal                                       10,500.00

$ 10,500.00 /105 units = $100.00 new average cost for item.

In this example the incorrect receipt does not affect the average cost of the item.

b.) Creates a receiving transaction for 100 X 100.00 or 10,000.00 and posts this transaction to Inventory (as a debit) and to the Unvouchered Inventory account (as a credit).

Dr Inventory 10,000.00

Cr Unvouchered Inventory 10,000.00

3.)  During AP Invoice Entry the operator notices that the vendor is billing for 10 units at 100.00 (the correct quantity shipped at the correct price) instead of for 100 units at the correct price.  The AP operator then does the following.

a.) The AP operator verifies the quantity actually received with the receiving and or inventory control department (the quantity can be verified by them using the inventory item history for the file and by physically counting the on hand quantity for the item).

b.) Once the operator has confirmed the actual quantity received, they input the vendor invoice at the correct amount (the amount billed by the vendor) and they tag the inventory receipt records for the item which have a value of 10,000.00.  This attaches the correct receiving records to the invoice and clears the entire 10,000.00 amount out of the unvouchered inventory account balance.

c.)  At this point, the AP invoice has an undistributed amount of $9000.00 which is charged to the Purchasing Quantity Variance account.

The journal entry resulting from these steps is as follows.

Dr Unvouchered Inventory    10,000.00

Cr                Accounts Payable                1000.00

Cr                  PO Quantity Variance           9000.00

4.)  The information about the quantity variance is forwarded to the inventory control clerk who must make the appropriate quantity adjustment using the Inventory Adjustment program.  In this example, the inventory quantity needs to be decreased by 90 units (the difference between the quantity received in the computer and the amount physically received and billed for by the vendor).  The operator uses the inventory adjustment code for PO Qty errors which causes the system to make the following entry.

Dr.  PO Quantity Variance    9000.00

Cr       Inventory                          9000.00

This corrects the inventory account in the general ledger and it removes the balance in the PO Quantity Variance account that was posted by the accounts payable department.