Non-inventory and consumable items

Inform uses a Non-Inventory G/L account to filter out purchasing and selling transactions that do not qualify as physical inventory movements. This account should be reviewed on a monthly basis and reallocated to the appropriate G/L accounts by journal entry.

Differences between inventory and non-inventory

• Inventory has physical mass and substance. Because it can be stocked in anticipation of future sales, there will generally be a quantity on hand.  The quantity of each individual item multiplied by its cost generates a stock value and corresponding General Ledger Value.
  1. Inventory items appear on the Inventory Value Report.
  2. Quantities are tracked in the system in real time.
  3. Each item supports multiple cost streams, only one of which is used for financial valuation purposes.  Most commonly, this is C2 Smooth Weighted Average Cost.
  4. The Inventory G/L account is debited and credited in accordance with buying, selling and adjusting activity.
• Consumables have neither mass nor substance and do not exist until incurred. They are handled differently from a stock and G/L perspective. Placement of such items on a Sales Order may have an effect on the Non-Inventory account if there is a cost attached.
  1. Consumable items do not appear on the Inventory Value Report.
  2. Quantities are not tracked in Product Analysis or other historical inquiries.
  3. These items support the same multiple cost calculation streams as regular items.
  4. Consumables must be placed in general ledger specific product lines to control the posting through the Sales Journal, Purchase Journal and Inventory Control Journal.

• SP Items (not to be confused with Fast Product “SP*0012345” items) are also treated as intangibles. Placement of such items on a Sales Order can potentially have an effect on the Non-Inventory account if you are using the same cost for inventory valuation and sales order display purposes or if the cost is overridden on the sales order. Avoid the use of SP items unless you need to add a comment line on an invoice or issue a Sales Tax credit.
• Merchandise Rebates do not affect inventory cost on the G/L, and therefore will default to the Non-Inventory account because there is no PO involved. It is recommended that the PO or Reference field is used to indicate that the transaction is a rebate so it can more easily be identified during the monthly review of the Non-Inventory account.
• Converted Received Purchase Orders from a previous system will not generate a valid Linked Receipt. The system will substitute the Non-Inventory account from the applicable branch. 
• Correctly Selected Inform PO’s will generate a valid Linked Receipt.  The merchandise and freight are posted to their predetermined Inventory and Freight accounts.

  

Bypassing the non-inventory account

To avoid use of the Non-Inventory G/L account on transactions that run through merchandise vendors, use the PO or Reference # field as follows:

Enter a hyphen (-) immediately before descriptive text.  For example, “-Second Quarter Rebate.” This trick allows the choice of G/L numbers.

Non-inventory scenarios

Refer to the table below for common Non-Inventory situations, G/L effects and corrective measures.

Merchandise Scenario	BUYING Purchase Journal (Source Code AP)	SELLING Sales Journal (Source Code SJ)
An invoice for a merchandise vendor is missing a valid link to the PO.  This will be evident if there are no Linked Receipts on the invoice screen.  All vendors coded to the Inventory G/L account (as specified in the G/L Control Table) follow this rule.		A consumable item is placed on a sales order.  At the time of the sale, this item has a dollar value in whichever “C” field is being used for Sales Invoice G/L Cost (generally this is C2).
G/L Effect	Debit Non-Inventory/Credit Accounts Payable	Debit Cost of Sales/Credit Non-Inventory
Correction	Debit Inventory/Credit Non-Inventory	Debit Non-Inventory/Credit Cost of Sales

Rebate Scenario	BUYING Purchase Journal (Source Code AP)	SELLING Sales Journal (Source Code SJ)
A vendor credit invoice is received for a rebate.  It is entered as a negative A/P invoice to reduce the amount owed to the vendor.		A consumable item is placed on a sales order as a negative quantity to give a customer an instant rebate.
G/L Effect	Debit Accounts Payable/Credit Non-Inventory	Debit Non-Inventory/Credit Cost of Sales
Correction	Debit Non-Inventory/Credit Rebate Income	Debit Rebate Income/Credit Non-Inventory

Upgrade Scenario	RETURN TO VENDOR Purchase Journal (Source Code AP)	RETURN FROM CUSTOMER Sales Journal (Source Code SJ)
Users upgrading to Inform Version 17 must specify a Vendor Return Inventory G/L account on the G/L Control Table.		Otherwise the system will substitute the Non-Inventory account for customer returns designated to go back to the vendor
G/L Effect	Debit AP / Credit Non-Inventory	Debit Non-Inventory / Credit Cost of Sales
Correction	Debit Non-Inventory/Credit Inventory	Debit Inventory / Credit Non-Inventory