If you have project commitments for non-stock items such as services and expenses, keep the following in mind when you are handling a price variance on the AP Bill that is different from the Purchase Order and how that impacts your projects.
On the General Settings tab of the Purchase Orders Preferences form, there is a selection box called Allocation Mode for Purchase Price Variance. You can choose between:
1. Inventory Account – meaning price difference will be posted to the inventory account for stock items and the expense account for non-stock items. This selection requires an associated reason code.
2. Purchase Price Variance Account – meaning price difference will be posted to the PPV account.
Generally speaking, a PPV account is used to record the difference in standard cost and actual price. If you’re using the Standard Costing method, then a PPV account is important to measure how market price changes have affected the gross margin compared to the company’s budget. Since non-stock items in Acumatica are based on standard cost, it is natural to use the second allocation mode to capture PPV.
However, when a non-stock item was purchased for a project, you want the price difference to go to the expense account for proper billing. In the example below, you can see that I hit my project with 2 AP bills that have price variance. For illustration purpose, I doubled the PO price of $10 to show a $10 PPV. With allocation to the inventory account, the project amount was $20 (net out from lines 3-5). With allocation to the PPV account, the project amount was $10 (net out from lines 8-9) and the amount that hit PPV did not show up in the project.
The allocation mode is a universal setting, so you must pick the one most relevant to your organization.
If you have any questions or need more information about how this works, feel free to get in touch with us here at Central Nervous Systems.
Eric.