The movement of the inventory from one warehouse to another is recorded in the GL by a decrease in the asset account of the issuing (or central) warehouse and increase in the asset account of the receiving (or subsidiary) warehouse. (Refer to the Internal Replenishment (Intracompany) transaction in the Accounting Activities Table.) The central warehouse can issue items at the current average cost or the warehouse can mark up the items at the time of issue. Inventory mark up is referred to as storage overhead in the NCAS. In this course, the term issuing cost refers to the average cost of the item plus any applicable storage overhead.
For the central warehouse, within the appropriate group account for the item, the Reserve for Inventory account (event ID A020) is debited. The transaction amount is the quantity shipped multiplied by the issuing cost of the item, including any storage overhead. The Inventory asset account (event ID A010) is credited for the quantity shipped multiplied by the average cost of the item, excluding any storage overhead. If storage overhead is applied to an item, the Storage Overhead account (event ID A060) is credited for the amount of the storage overhead.
For the subsidiary warehouse, the Inventory asset account (event ID A010) is debited and the Reserve for Inventory account (A020) is credited within the group account for that item. The transaction amount is the quantity issued from the central warehouse multiplied by the average cost of the item, including any storage overhead, at the time of issue.
The GL effective date for this transaction is the date the items are shipped from the central warehouse.
Funds are not checked for the movement of inventory between warehouses within the same company because the inventory has already been paid for. Replenishment expense accounts (53XXXX) are not affected by internal replenishment transactions within the same company.
For example, your warehouse (XXTRN3) ordered five tubes of antiseptic burn ointment from another warehouse (XXTRN4) belonging to the same company within your warehouse. At the time of shipment, the average cost of one tube of ointment is $2.10 per tube. No storage overhead is applied to burn ointment.
In this example, warehouse XXTRN4 is the central or issuing warehouse and warehouse XXTRN3 is the subsidiary or receiving warehouse. The transaction amount for this order is $10.50 (five tubes multiplied by $2.10 per tube). The group account for burn ointment is XXMEDICAL. Warehouse XXTRN4 uses location group account XXTRN4 to account for burn ointment.
Note: Creating a location group account was described in the Group Account Processing section of this course. In this example, warehouse XXTRN4 belongs to the same company as warehouse XXTRN3. However, XXTRN4 is a different center from warehouse XXTRN3. The location group account, XXTRN4, has been created by overriding the default center used in the group account XXMEDICAL. Remember that the group account identifier for a location group account is the same as the warehouse identifier.
The accounting entries generated
for this transaction are:
| (For receiving warehouse XXTRN3) |
|
|
| Inventory (XXMEDICAL) |
10.50
|
|
| Reserve for Inventory (XXMEDICAL) |
10.50
|
|
| (For issuing warehouse XXTRN$) | ||
| Reserve for inventory (XXTRN$) |
10.50
|
|
| Inventory (XXTRN4) |
10.50
|