Define 'Average Cost'
Average Cost or Weighted Average Cost = Total Cost [Inward Value] / Total Qty [Inward qty] {Annual}
Flow of Average Cost Calculation in Tally
The example provided below shows the Flow of the Average Cost in Tally.
Entries:
|
Date |
Particulars |
Tracking Number |
Qty |
Rate |
Amount |
|
02-04-2008 |
Receipt Note |
No.1 |
100 |
120 |
12000 |
|
04-04-2008 |
Purchase |
Against No.1 |
50 |
125 |
6250 |
|
05-04-2008 |
Sales |
|
15 |
150 |
2250 |
|
10-04-2008 |
Rejection Out |
Against No.1 |
-5 |
120 |
-600 |
|
11-04-2008 |
Debit Note |
Against No.1 |
2 |
120 |
240 |
|
24-04-2008 |
Purchase |
Against No.1 |
47 |
135 |
6345 |
Let us see how the Average Cost is valuated in Tally for the entries mentioned above:
|
|
|
Inward |
Tracking System |
Average Cost |
|||||||
|
Date |
|
Qty |
Rate |
Amount |
No. |
Qty |
Rate |
Amount |
Qty |
Rate |
Amount |
|
02-04-2008 |
Receipt Note |
|
|
|
1 |
100 |
120 |
12000 |
100 |
120.00 |
12000 |
|
04-04-2008 |
Purchase |
50 |
125 |
6250 |
1 |
-50 |
120 |
-6000 |
100 |
122.50 |
12250 |
|
05-04-2008 |
Sales |
|
|
|
|
|
|
|
100 |
122.50 |
12250 |
|
10-04-2008 |
Rejection Out |
|
|
|
1 |
-5 |
120 |
-600 |
95 |
122.63 |
11650 |
|
24-04-2008 |
Purchase |
47 |
135 |
6345 |
1 |
-47 |
120 |
-5640 |
95 |
130.05 |
12355 |
|
|
|
Outward |
Consumption |
Closing (Daily) |
Closing (Stock Voucher) |
|||||||
|
Date |
|
Qty |
Rate |
Amount |
Rate |
Amount |
Qty |
Rate |
Amount |
Qty |
Rate |
Amount |
|
02-04-2008 |
Receipt Note |
|
|
|
|
|
100 |
120.00 |
12,000.00 |
|
|
|
|
04-04-2008 |
Purchase |
|
|
|
|
|
100 |
122.50 |
12,250.00 |
50 |
245.00 |
12,250.00 |
|
05-04-2008 |
Sales |
15 |
150 |
2250 |
122.50 |
1837.5 |
85 |
122.50 |
10,412.50 |
35 |
297.50 |
10,412.50 |
|
10-04-2008 |
Rejection Out |
|
|
|
|
|
80 |
122.63 |
9,810.53 |
35 |
280.30 |
9,810.53 |
|
11-04-2008 |
Debit note |
|
|
|
|
|
80 |
122.63 |
9,810.53 |
33 |
297.29 |
9,810.53 |
|
24-04-2008 |
Purchase |
|
|
|
|
|
80 |
130.05 |
10,404.21 |
80 |
130.05 |
10,404.21 |
A Receipt Note entry was passed with a tracking number No.1. So the Average Cost on 2nd April 2008 is 12000/100 = Rs.120.
In the Stock Voucher details, the Receipt Note show the closing value as Rs. 12000 under the Purchase Bills pending [collection].
In a daily balance, press F6. The Closing Value of stock is displayed as Rs.12000.
The Purchase Entry is passed against Receipt Note no.1. Already the Receipt Note cost is added to the Inward Cost on 2nd April 2008. The difference between the Receipt Note value and Purchase value will be added from the Inward Cost.
The Purchase value is Rs. 6250 and the Receipt Note value is 6,000 so the difference, which is Rs.250 will get added to the Inward Cost.
As on 4th April 2008, the Average Cost = (12000+250) / 100 = 122.50. The Closing Value is Rs.12,250 for 100 nos.
Closing Qty > Opening Quantity + Inward Quantity – Outward Quantity
Closing Rate > Closing Value / Closing Qty
Closing Value > System determined value as per valuation method selected in the Item Master
On purchasing a line item, the closing rate is shown as Rs.245 [12250 / 50 ] since the closing value on that day is Rs.12,250 and the closing quantity as per Stock Voucher is 50. This is because the Receipt Note will show it under the collection of Purchase Bills pending.
In the Daily breakup, the difference of the Receipt Note and Purchase is added to the Closing Value.
Sales made for 15 nos. of Quantity.
The Cost of Sale is determined based on the Average Cost on 5th April 2008. The Average Cost continues to be Rs.122.50 since there is no change in the Inward Cost. So the consumption or cost of sale = 15 nos. x Rs.122.50 = 1837.50
Likewise the Closing Value of an item = [100-15] x [122.50] = 85 x 122.50 = 10412.50
Transactional Consumption --> System determined value based on valuation method
Total Consumption --> Opening Value + Inward Value – Closing Value
Transactional Gross Profit --> Outward Value – Transactional Consumption value
Total Gross Profit --> Total Outward Value – Total Consumption value
The Rejection Out entry was passed against Tracking number 1 for 5 Nos.
Since the item is sent out of the company, the valuation gets affected. So the Rejection Out value automatically gets reduced from the Inward Cost.
Average Cost = [12250 – 600] / [100-5] = 11650/95 = Rs.122.63
Closing Quantity = 85 - 5 = 80 Nos.
Closing Value = 80 Nos. x Rs.122.63 = 9810.53
The Debit Note entry is passed against the Rejection Out Tracking number 1. Already a Rejection Out cost is included in the Inward Cost and only the difference of the Debit Note Cost and Rejection Out cost gets included in the Inward Cost.
The difference between a Debit Note and Rejection out = [2 x 240] – [2 x 240] = Zero.
The Average Cost continues to be Rs.122.63 since there is no change in the Inward Cost.
Closing value = 80 x 122.63 = 9810.53
A Purchase Note is raised against a balance Receipt Note tracking Number 1. Since the Receipt Note Cost is already included in the Inward Cost, only the difference between a Receipt Note Cost and Purchase Cost can be included in the
Inward Cost.
The difference between a Purchase and Receipt Note = [47 x 135] – [47 x 120] = Rs. 705 is added to the Inward Cost.
Total Inward Cost = Rs.11650+ 705 = 12355
Total Inward Qty = 95
Average Cost = 12355 / 95 = 130.05
Closing Quantity = 80
Closing Value = 80 x 130.05 = 10,404.21
Rs.955 is the difference between the Purchase and Receipt Note cost. [250+705=955]