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Last updated on July 6, 2008. Email your inquiries and suggestions to vincent
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wavelet.biz
Copyright of WAVELET.BIZ
When a merchant receives stock from their supplier on a consignment basis, the procedures and steps are not much different from purchasing the stock outright. This is because regardless of whether it is purchases or consignment, when the stock on consignment are received from the suppliers, the merchant owes the supplier the stock it has received. The only difference is that, whether the merchant owes the supplier in the form of stock (for consignment), or the merchant owes the supplier in the form of money (for outright purchase on credit terms).
Stock Purchases vs Consignment Stock from Suppliers
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Stock Purchases |
Consignment Stock |
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Merchant owns the stock |
Supplier owns the stock |
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Merchant owes the supplier payments based on the amount by Goods Received Note created for the stock received. Supplier invoice is normally sent to the merchant as soon as the stock are delivered to the merchant. |
Merchant does not owe the supplier any payments until the stock is sold. Even though payments are not due until the goods are sold, but once goods are delivered to the merchant, the stock is like a loan in the form of stock. So, even though no supplier invoice is received, but the account payable should accurately reflects the amount of stock owing to the supplier. |
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Tax authorities in certain countries actually consider stocks on consignment as sales for the suppliers, to prevent any manipulation of revenue for a company. |
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GRN is created when stock is being received. |
GRN is created when stock is being received. |
1. Receiving Consignment Stock From Suppliers
a) Just key in the stock using TRADING -> GOODS RECEIVED NOTE
2. Selling Stock
a) Use TRADING -> CASHSALE / INVOICE / FULL SCREEN CASHSALE
3. Monthly Report
Use the following reports to identify the amount due to the suppliers
a) MANAGER -> SALES RELATED REPORTS -> STOCK SALES REPORT BY ITEM CODE
b) MANAGER -> SALES RELATED REPORTS -> STOCK SALES REPORT
4. Supplier Invoice
When the merchant receives supplier invoice (calculated based on stock sold), the account / procurement should compare it with the reports generated in (3).
Please take note that no GRN is to be created for the Supplier Invoice, to prevent duplicate entries of stock into the Wavelet EMP. The supplier invoice created by the supplier after computing the cost of goods sold will be processed by the Finance Department to issue payments.
5. Payment Vouchers
Payment Vouchers are created based on the Supplier Invoice calculated based on cost of goods sold for the consignment stock. The payment vouchers will be used to knock off the Goods Received Notes.
6. Purchase Return
Should the supplier decided to reduce their consignment stock, or exchange the stock consigned with other stock, purchase returns and GRN will be created.
7. Price Changes
If the price of the consignment stock has changed, it is absolutely important for the merchant to alerted. A few things that the merchant should perform:
a) Use INVENTORY -> RESET MA function to adjust the stock costs so that the gross profit and other reports will be reflected correctly
b) Since GRN created earlier determines the amount of stock received only, the when the price of the stock has changed, the merchant will owe the supplier the amount equivalent to the stock balance in the store.
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Transaction |
Price of Consignment Stock Increase |
Price of Consignment Stock Decrease |
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a) INVENTORY -> RESET MA |
Debit "inventory" General Ledger Credit "inventoryVariance" General Ledger
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Debit "inventoryVariance" General Ledger Credit "inventory" General Ledger
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b) SUPPLIER -> CREDIT MEMO |
Debit "inventoryVariance" General Ledger Credit Account Payable
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Debit Account Payable Credit "inventoryVariance" General Ledger |