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a business perspective, Scrap is a product or material that is discarded in the production or consumption process and withdrawn for recycling or disposing.
When products and materials are removed, depending on their intended use afterward, they can either be restocked in inventory or recycled, with the remaining value posted accordingly.
Requirements
This tutorial requires the installation of the following applications/modules:
Warning
In Viindoo, when products are moved to the scraps location, they are still those products with names and units of measure; they are not changed to other products.
Scraps are still the used product but are stored at the scrap locations.
If you need to change them to other products, you can consider using a manufacturing order to do it after moving them to the scrap location.
Configure Scrap Location¶
After installing the Inventory application, you need to activate the Multi-Locations feature by navigating to Configuration > Setting > Warehouse > Storage Locations > Save.
Next, you go to Inventory > Configuration > Locations, turn off the Internal filter then select Virtual Location/Scrap location.
In case of disposal¶
Some configurations that need to be noted for the scrab location in this situation are as follows:
Location Type needs to be Inventory Loss.
It is mandatory to check Is a Scrap Location?.
In the Accounting Information, you need to set up Accounting Accounts to record the cost of dispose those products.
In case of recycling¶
Some configurations that need to be noted for the scrab location in this situation are as follows:
Location Type needs to be Internal to store the scraps before further processing, such as selling them or reusing them.
It is mandatory to check Is a Scrap Location?.
Manage Scraps 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.
Scraps from Manufacturing process¶
In the manufacturing process, scraps may occur either during production (from components) or after completing the process (from finished goods). For any cases, in the interface of the production, you can press the Scrap button to record the discarded products and materials to the scrap locations.
- In which:
Product: Select the product to be scrapped to a designated scrap location. This could be finished goods from completed manufacturing orders or raw materials from ongoing manufacturing processes.
Quantity: The number of products to be scrapped.
Source Location: The storage location where the chosen product is taken.
Scrap Location: The location where scrapped products are moved should be selected based on your further processing needs. Selecting an appropriate scrap location ensures proper handling in the system’s subsequent workflows.
Click Scrap Products to confirm the accounting for scrap. Now, the MO is shown that this transfer has generated scrap.
Click on Scrap to be redirected to a list of Scrap Orders created.
Record the cost of scraps¶
If scraps are moved to the virtual scrap locaiton, simultaneously, the accounting entry related to the inventory valuation of the Scrap is registered. Access Accounting > Accounting > Journal Entries, remove default filters and search by manufacturing order reference to view recorded accounting entries.
Further processing with srcaps¶
If scraps are moved to the internal scrap location, it’s like an internal transfer in Viindoo. Later, you can either sell them or reuse them in the manufacturing process.
Selling scraps: In the sales order, you can choose the warehouse to deliver the scraps
Reuse in manufacturing: You can transfer those products from the scrap location to the production location to consume
Scraps from Inventory Adjustment process¶
Moving products to the scrap locations while inventory adjusment process is similar to manufacturing process. But the person in charged is inventory staff. And they can navigate to Inventory > Operations > Scrap to do this transaction.
See also
Related article
Optional module