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When a quantity is entered in the Ordered field on the Purchase Order Entry Lines tab, the Quantity on Purchase Order field in the Inventory file is adjusted by the quantity ordered.
The amount in the Quantity on Hand field in the Reorder Data window in Purchase Order Entry is not adjusted until the order has been received. At the completion of Receipt of Goods Entry, the Receipt of Goods Register prints and then updates the Inventory files. During this update, in the Reorder Data window, the amount in the Quantity on Hand field for each inventory item is increased by the received quantities indicated on the receipts. The amount in the Quantity on Purchase Order field is reduced by the original ordered quantity and the quantity on back order, if any, is added to it.
Return of Goods Entry and Material Requisition Issue Entry also affect the Quantity on Hand field. When the Return Order Register prints and updates, the amount in the Quantity on Hand field for each inventory item is reduced by the entered quantity indicated on the returns. In addition, the amount in the Quantity on Purchase Order field is increased by the quantity returned for any inventory item from a purchase order. The quantity received for the original purchase order line is reduced, and the quantity back ordered for the original purchase order is increased by the quantity returned. The Material Requisition Issue Entry update reduces the amount in the Quantity on Hand field for each inventory item by the issued quantity indicated for each entry.
If the Inventory Management module is integrated with Purchase Order, the quantity on purchase order and the quantity on hand are adjusted automatically in the Inventory files while purchase orders, receipts, and returns are processed.
Yes, if you regularly order large quantities of an item for which shortages or over-deliveries are inherent in the packaging of the product, it is not practical to require a receipt of the exact quantity ordered. In Purchase Order Options, you can specify a range of percentages within which partial purchase orders are considered complete. A partial purchase order is considered complete when the following conditions are met:
The Automatically Close Partially Received Purchase Orders check box is selected in Purchase Order Options.
The quantity received is less than the quantity ordered and the back ordered quantity is set to zero in Receipt of Goods Entry.
The variance between the quantity received and the quantity ordered is less than or equal to the receipt variance specified in the Receipt Variance to Close Purchase Order Line field in Purchase Order Options.
When partial purchase orders are automatically closed in Receipt of Goods Entry and Receipt of Invoice Entry, the quantity back-ordered defaults to zero and the line is considered complete.
In Receipt of Invoice Entry, the receipt variance to close percentage is compared with the actual variance percentage of the quantity invoiced and the quantity ordered. This task processes invoice receipts the same way as in Receipt of Goods Entry, with the exception that the actual receipt variance percentage is calculated using the quantity invoiced instead of the quantity received.
In Daily Receipt Registers, a Back Order status is assigned to purchase orders only if the quantity back-ordered is not zero or if the quantity received does not equal the quantity invoiced. If the quantity back-ordered is zero and the quantity received equals the quantity invoiced, a Complete status is assigned.
To ensure that you are correctly charged for drop-shipped items, there are special circumstances that apply. The following circumstances apply if a drop-ship purchase order is prepared, but the quantity received at the drop-ship location is less or more than the quantity ordered:
If the balance of the order is to be received at a later date, only the quantity received is recognized in Receipt of Invoice Entry, and the balance due is received in Receipt of Invoice Entry when the balance is received.
If the balance of the order is cancelled, the entire amount of the order is received in Receipt of Invoice Entry and a return of goods with the invoice number is processed for the quantity that will not be received. You cannot process a return on a drop-ship order; therefore, leave the Purchase Order Number field blank in Receipt of Invoice Entry and change the invoice number by at least one character (for example, if the original number is 12345, change it to 12345-CM).
The overage should be received as a separate receipt in Receipt of Goods Entry with the invoice number. Like the return of goods, you need to change the invoice number by at least one character (for example, if the original number was 12345, change it to 12345-DM).
Assume you have a purchase order consisting of a one-line order for 1000 pounds of a chemical that is delivered in bulk. In Purchase Order Options, you have specified a 2% receipt variance within which the order is considered complete.
To calculate the actual variance percentage of the line, multiply 100 by the quotient of the quantity received divided by the quantity ordered, and subtract this figure from 100.
In Receipt of Goods Entry, if you received 990 pounds of the chemical, the actual variance percentage of the line is calculated as follows:
100 - [(990 ÷ 1000) x 100] = 1%
The quantity back ordered would default to zero instead of 10 because the 1 percent actual variance is less than the 2 percent receipt variance needed to close a purchase order as specified in Purchase Order Options.
If you received 950 pounds, the actual variance percentage is calculated as follows:
100 - [(950 ÷ 1000) x 100] = 5%
In this case, the 5 percent actual variance exceeds the 2 percent allowable receipt variance. As a result, the quantity back ordered would default to 50, and a Back Order status would be assigned.
When a drop-shipped purchase order is entered, the inventory cost of goods sold account defaults automatically as the general ledger account in the G/L Account field in Purchase Order Entry. When the order is entered in Receipt of Invoice Entry, the general ledger account from the Job Cost module is used as the general ledger account. To use a different account, modify the general ledger account in Receipt of Invoice Entry and not in Purchase Order Entry, so that the Job file is updated with the correct general ledger account.
In Receipt of Invoice Entry, if you did not enter a general ledger account in Job Cost for the job type (if posting work-in-process) or the cost code or cost type (if not posting work-in-process), the G/L Account field remains blank and an account must be entered manually.
Note If you are entering a material requisition, you cannot cost an item to a subcontract cost type.
