Any time an inventory stock level changes outside of a Purchase Order or Sales Order, the transaction is classified as a variance. Variances represent adjustments to inventory that can either increase or decrease the overall value of your inventory assets.
Descartes Finale allows you to create Reason Codes to categorize and explain these inventory changes. Each reason code can be linked to a specific Chart of Account, enabling you to accurately track and report the financial impact of inventory adjustments.
Create Reason Codes
You first need to create/edit your reason codes within your Descartes Finale account. You will find this section in the Variance tab of your Application Settings.
Map Reason Codes to Account
The next step is to map your Reason Codes to the appropriate variance accounts. This assumes that you’ve already created additional variance accounts in your Chart of Accounts, allowing for multiple mapping options.
For each Reason Code, you can specify which variance account should be used. If no specific account is selected, the transaction will default to the Inventory Variance account.
Ultimately, every inventory variance transaction affects both accounts: a debit and credit are recorded between the Inventory Variance account and the Inventory Asset account, depending on the nature of the adjustment.