Adaco: Outlet Types

Overview

When setting up an Outlet, as included in Adaco: Property Setup: Location, there are two settings which impact the way that inventory is tracked and reported in it.

There are three possible combinations of these settings. This article will give an explanation of each of these combinations (listed below).
 

• Scenario 1: Inventory = False, Perpetual = False
• Scenario 2: Inventory = True, Perpetual = True
• Scenario 3: Inventory = True, Perpetual = False  

Scenario 1: Inventory = False, Perpetual = False

Fig.1 - 'Inventory' & 'Is Perpetual' both un-ticked

Typical Use:
This scenario would typically be used for an expense department or Outlet where inventory is not maintained and where all costs are charged directly to expense or cost accounts. For example a Finance department would be unlikely to record inventory of supplies and would most probably charge all purchases directly to expense accounts such as Stationery or Office Consumables.

GL Account Coding:
For this scenario, items would typically be assigned to either cost or expense accounts (P&L accounts)

Inventory Counting:
Outlets within this scenario cannot be included in an inventory cycle and it is not possible to enter a physical inventory count. 

The Stock On Hand value for items within an Outlet will be updated according to daily transactions. However when the period is closed the On Hand value will be reset to zero.

GL Inventory Variance / Change Journal:
There would be no entry in the GL Inventory Variance Journal for this type of Outlet.


Scenario 2: Inventory = True, Perpetual = True
 

Fig.2 - 'Inventory' & 'Is Perpetual' both ticked

Typical Use:
This scenario would typically be used for an Outlet or storeroom where accurate “real time” inventory is maintained in Purchasing & Inventory (Adaco) and where the system on hand inventory could be compared to the physical inventory at any point during the period to identify variances between actual and theoretical inventory. For this type of Outlet, the Outlet Variance Report can be run.

GL Account Coding:
For this scenario items would typically be assigned to an inventory account (Balance Sheet accounts). The inventory account would have an offset account set as the corresponding cost account.

Inventory Counting:
Outlets within this scenario can be included or excluded from an Inventory Cycle. In both cases a physical inventory count can be entered for the Outlet.

Where the Outlet is included in the inventory cycle then the physical inventory count will not be pre-populated and the user will need to enter a physical count. This would be a “blind” stocktake.

Where the Outlet is not included in the inventory cycle the physical inventory count will be pre-populated with the current calculated stock on hand. If not amended then these values will be taken as the closing inventory when the period is closed. This would be an inventory “rollover”.

GL Inventory Variance / Change Journal:
When the period is closed the variance will be calculated as follows:

A theoretical “on hand” count will be calculated by taking the opening stock, plus or minus any purchases or returns and plus or minus any Outlet requisitions or transfers.

Please note - sales transactions are not considered when calculating the theoretical closing stock for the purposes of inventory variance calculations so the calculated system on hand value may differ from that shown in the Outlet Variance Report.

The physical entered inventory is then deducted from the calculated system on hand stock to calculate the variance.

For example:

Opening Stock                         100
Purchases                                +40
Requisitions / Transfers           +30
Sales Transactions                   -60

Calculated Stock on Hand                              170 (Opening stock + Purchases + Requisitions / Transfers)
Actual Physical Stock on Hand                       108
Variance                                                          -62 (Actual stock on hand – calculated stock on hand)

In this example a credit to the account cross reference would be created for -62, which would reduce the value of inventory and a corresponding debit for +62 will be posted to the offset account, typically being the corresponding cost of sales account.

The value of 62 would represent the total consumption, which would include the 60 sold and a further 2 of stock take variance.


Senario3: Inventory = True, Perpetual = False

Fig.3 - 'Inventory' ticked, 'Is Perpetual' un-ticked

Typical Use:
This scenario would typically be used for an Outlet where accurate “real time” inventory is not maintained in Adaco however the opening and closing inventory is considered when calculating the final cost of sales. In this type of Outlet all purchases and transactions are considered as, and posted to, consumption at the point of receipt. For this type of Outlet, the Outlet Variance Report can be run.

GL Account Coding:
For this scenario items would typically be assigned to cost of sales accounts. The cost of sales accounts would have its offset account set to the corresponding inventory account. Items are considered as consumption until the end of the period when part of the value could be posted back to inventory according to any inventory change.

Inventory Counting:
Outlets within this scenario can be included or excluded from an Inventory Cycle. In both cases a physical inventory count can be entered for the outlet.

Where the outlet is included in the inventory cycle then the physical inventory count will not be pre-populated and the user will need to enter a physical count. i.e. this would be a “blind” stocktake.

Where the outlet is not included in the inventory cycle the physical inventory count will be pre-populated with the opening stock quantity (i.e. the closing stock quantity from the previous period).  If these are not amended then these values will be taken as the closing inventory when the period is closed (in which case there would be no inventory change). 

GL Inventory Variance / Change Journal:
When the period is closed the variance will be calculated as follows:
The current physically entered stock on hand less the opening stock (i.e. the closing stock from the current period less the closing stock from the previous period)

For example:
Opening Stock                      100
Purchases                             +40 ignored in inventory change calculation
Requisitions / Transfers        +30 ignored in inventory change calculation
Sales Transactions                -60 ignored in inventory change calculation

Calculated Stock on Hand               170 ignored in inventory change calculation
Actual Physical Stock on Hand        108
Variance                                            8 (Actual stock on hand – previous period stock on hand)

In this example, where there is a positive inventory change, a credit to the account cross reference would be created for -8 which would reduce the value of cost of sales and a corresponding debit for +8 will be posted to the offset account which would typically be the corresponding inventory account.  

Important note - For perpetual outlets a negative variance is treated as a credit and will be applied to the Account Cross Reference of the item

For non-perpetual outlets a negative variance is treated as a debit and will be applied to the Account Cross Reference of the item.