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The Stock Adjustment account tracks overall changes in purchase prices and should be created in the General Ledger as a Purchase Account and zero-rated for GST.
This account must also be entered into the Account Defaults window in Main menu > Maintenance module > Maintenance menu.
When you run the Create COS Journals procedure in Stock menu > Update Stock on Hand, and select the Create G/L entries for any purchase price variations or rounding adjustments check box, VisionVPM creates a journal between the Stock Control account and the Stock Adjustment account.
In VisionVPM, a stock item's average cost is calculated on the total purchase amount multiplied by the total purchased quantity.
Because VisionVPM uses an average cost for stock valuation, the value of your stock is going to be dependant upon when VisionVPM starts calculating the average cost from.
VisionVPM will use the later of the Year Begins date in Main menu > Maintenance module > Maintenance menu > Company Information
and Average Cost date in Main menu > Maintenance module > Maintenance menu > System Defaults > Stock tab.
In the example above, VisionVPM would use the date of 1 June 2009 to calculate the stock valuation.
If the Use average cost for stock valuations check box is not selected, VisionVPM will value your stock based on the Last Cost price.
For the purposes of calculating stock valuation in VisionVPM, only those stock items that contain a Pack Cost and are not marked as a Consumable will be included.
The stock valuation amount is calculated as the total of every stock item's stock on hand quantity multiplied by its average cost amount.
The stock adjustment amount is calculated as the stock valuation amount less the stock control account balance.
Consider the following example.
Let's say you only have 1 product on your shelf:
Purchase 1 Jan 10 1 item @ $10 Stock control now has $10.
Sell 2 Jan 10 1 item
Cal. COS 31 Jan 10 Writes the 1 sale * average cost of $10 = $10 to the COS and stock control now =$0
So at this stage you have no stock on hand, and both the stock valuation and stock control = $0.
Now, we'll make an extra purchase in Feb and the starting average cost date is 1 Jan 10.
Purchase 1 Feb 10 1 item @ $12 Stock Control now has $12
Sell 2 Feb 10 1 item
Cal COS 28 Feb 10 Writes the 1 sale * average cost of $11 ($22/2) = $11 to the COS and stock control now = $1 ($12-$11)
So the stock control now has $1 in it because of calculating the COS using an average. Now we write the final stock adjustment journal:
Final Journal 28 Feb 10 Stock Control = $1, Stock Valuation = $0, $1 gets written into stock adjustment account and decreased from stock control.
Therefore, you can see from the example above, how the stock control account can be different from your stock valuation and the need to create a stock adjustment to bring your stock control account into line with your stock valuation.
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