French Perpetual Inventory

 

Introduction.

 

If you work with Perpetual inventory, all your movements that are linked to the inventory management will have direct impact on your financial accounting. This refers either to the receiving or fulfilment of your goods. The French method in particular passes the purchase entry into the expense account and not into the balance sheet account, as is the case for the English method. This document will explain the different steps of the French Perpetual Inventory.

 

 

Module	Type	Journal	Compte	Débit	Crédit
Purchase	Receipts	General Journal	Stock	100
			Invoice to be received		100
	Puchase invoice	Purchase	Accounts payable		121
			Stock purchase cost	100
			VAT to be claimed	21
		General Journal	Invoice to be received	100
			Stock changes		100
Sales	Fulfillment	General journal	Stock changes	100
			Stock		100
	Sales invoice	Sales	Account receivable	121
			Revenues		100
			VAT to be paid		21

 

Settings.

 

Before passing your purchase entries, different settings have to be defined.

 

1)      General Settings

In the general settings, menu <System-General-Settings>, in the tab 'Inventory settings', you can define the valuation method you want to use.

For French Perpetual inventory, you should select the option <<Perpetual Inventory>>.

 

2)      Invoice to be received account and stock journal.

Again in the general settings, menu <System-General-Settings>, in the tab 'General ledger accounts', you have to define the account that will be used for invoices to be received and the general journal that will be used for the stock changes.

 

3)      Item group.

To define the item group, menu <System-Logistics- Item groups>, you have to define the relationship between the item group and the general ledger accounts.

 

A. Puchase invoice accounting

 

To better understand the entries, we will use an example. We created a purchase order of 100€. The purchase invoice that we received will be 110€.

 

1)      Purchase order to your supplier.

During the creation of your order, menu <Purchase-Entries-Purchase order>, no movement of stock is generated in your accounts. This is because there is no movement of physical stock and the purchase order is only a receipt planning. It also allows you to know the stocks that are waiting to be received.

2)      Receipts of goods.

When you have received your ordered goods, menu <Purchase-Entries-Receipts>, an accounting entry will be created for your stock value in your financial accounting. This entry will be generated in the general journal as follows:

Account		Debit	Credit
Stock	340000 (1)	100
Invoice to be received	444000 (2)		100

(1)     The stock account defined in the item maintain screen.

(2)     The invoice to be received account defined in general settings.

The value in these accounts are taken from the registered purchase order.

3)      Creation of purchase invoice.

The entry of the purchase invoice must be done in the financial accounting directly, menu <Finance-Entry-Purchase> in the purchase journal. The entry that is generated will be as follows:

Account		Debit	Credit
Accounts payable	440000 (1)		133,1
Invoice to be received	444000 (2)	110,0
VAT to be claimed	411000 (3)	23,1

(1)     The accounts payable account defined in the purchase journal maintain screen that you had selected.

(2)     The invoice to be received account defined in the general settings.

(3)     the VAT to be claimed account defined in the used VAT code. In this case, the VAT is 21%.

The value in these accounts are taken from the registered purchase order.

4)      Inventory reconciliation.

The inventory reconciliation is a very important step in Exact Globe 2003. It links the invoice received with the receipt of goods.

Menu <Stocks-Warehouse management-Reconcile>

If there is a difference in amount between the receipt and the purchase invoice, the receipt entry is corrected to balance the Invoice to be received account. The entry generated for this case will be:

Account		Debit	Credit
Stock	340000 (1)	110
Invoice to be received	444000 (2)		110

For more explanation on this, please refer to the document: Réconciliation logistique.

 

5)      Perpetual inventory.

 The menu of perpetual inventory <Stock-Warehouse management-Perpetual inventory> will modify the already created purchase entry by passing the purchase entry not to a balance sheet account but to an expense account as is the French method.

 

This modification takes place in 2 steps:

 

a)      Correction of the purchase entry.

In a purchase invoice that you had created at point 3, the account <<Invoice to be received>> has been used instead of the account <<Purchase goods cost>>. When starting the application, the account <<Invoice to be received>> will then be replaced by the account <<Purchase goods cost>>.

Account		Debit	Credit
Accounts payable	440000		133,1
Purchase goods cost	604000 (1)	110,0
VAT to be claimed	411000	23,1

(1)     The account purchase goods cost is linked to the item group.

 

b)      Creation of a general journal entry.

A general entry is created at the same time to balance the account «invoice to be received» with the account <<stock changes>>.

Account		Debit	Credit
Invoice to be received	444000 (1)	110
Stock changes	609000 (2)		110

(1)     The account of invoice to be received defined in the general settings.

(2)     The account stock changes defined in the item maintain screen.

 

To have more explanation about this, please read the document: Perpetual inventory

 

B. Fulfillment and sales accounting.

 

If you use the sales order module as well, it is when you had fulfilled the stock that an account entry is generated in your accounting so decreasing the value of your stock.

Account		Debit	Credit
Stock changes	609000	100
Stock	340000		100

 

The value that will be taken for this entry depends on the method of valuation that is used. (FIFO, LIFO, APP, SCP)

 

C. Sales accounting

When you print your sales invoice definitively, the sales entry will then be generated in your sales journal.

Account		Debit	Credit
Account receivable	440000	121
Revenue	700000		100
VAT to be paid	441000		21

 

This document has been translated from the original French document 06.002.164.