Accounting for Inventory Scrap

From a business perspective, Scrap is a product or material that is discarded in the production or consumption process and withdrawn for other purposes or recycling.

When products and materials are removed, they are not considered inventory in the Viindoo Software. These items are sent to the damaged products and materials storage location known as Scrap Location.

Requirements

This tutorial requires the installation of the following applications/modules:

Configure Scrap Location

After installing the Inventory application, you need to activate the Multi-Locations feature by navigating to Configuration > Setting > Warehouse > Storage Locationns > Save.

Activate Multi-Locations

Next, you go to Inventory > Configuration > Locations, turn off the Internal filter then select Virtual Location/Scrap location.

Access the list of warehouse locations in Viindoo

It is mandatory to check Is a Scrap Location?. In the Accounting Information, you need to set up Accounting Accounts to record the generated scrap’s product valuation.

Create a new Scrap location in Viindoo

How to account for scrap in Viindoo?

Scrap can be generated during any of the receipt, delivery, or internal transfers of products and materials. However, with Viindoo All-in-one Enterprise Management Solution, the scrap recording action is similar for all of these operations. Therefore, we will guide you through a detailed process of accounting for scrap generated after production, inventory entry, and transfer to scrap.

Note

In order to have the automatic accounting entries generation as soon as scrap is created, you need to enable the Automatic Inventory Valuation on the Product category/Product settings.

At the completion interface of the production command and the quantity of finished products being inputted into inventory, the Scrap button appears.

Inventory Overview, Receipts and Delivery in Viindoo

When scrap is generated, press the Scrap button to record the discarded products and materials to the Scrap location.

Record the scrap generated in Receipt
In which:
  • Product: Choose the product scrapped to a scrap location.

  • Quantity: The number of products to be scrapped.

  • Source Location: The storage location where the chosen product is taken.

  • Scrap Location: The location configured where the scrapped products are moved to.

Click Done to confirm the accounting for scrap. Now, the receipt slip is shown that this transfer has generated scrap, and simultaneously, the accounting entry related to the inventory valuation of the Scrap is registered.

The accounting entry records the scrap generated in Receipts in Viindoo

Click on Scraps to be redirected to a list of Scrap Orders created in Receipts.

The information of Scrap in Viindoo

Access Accounting > Accounting > Journal Entries, remove default filters and search by product reference to view recorded accounting entries.

A list of Journal Entries generated in Receipt in Viindoo Journal Entry generated after Scrapping in Viindoo