Forum Discussion

Mark299's avatar
Mark299
Experienced User
4 years ago

Cost pricing clarification

HI Myob community Just to clarify when you purchase an item to out into your inventory to sell later is it the price you put in as the purchase price or is it the actual price that you paid. I purch...
  • Steven_M's avatar
    Steven_M
    4 years ago

    Hi Mark299 

     

    The "fair transfer price agreement" is not something that I would be able to comment on.

     

    However, there was a question relating to closing off an invoice and purchase without the impact on the bank account. Generally in these situations, you want to use a contra/holding account and use the below process:

     

    1. Create a holding account if you don't already have one - Accounts>>Accounts Lists>>New - give the account a number, name and set the account type to be Bank.
    2. When ready to make payment, go to Sales>>Receive Payments>>Select the Deposit to Account to be that newly created account and then process the payment as per normal.
    3. Once that has been created, go to Purchases>>Pay Bills>>Select the Pay from Account to be that newly created account and then process the payment as per normal.

    What the above process will do is put the payment from the invoice into the holding account and uses those funds to pay off the purchases. As no "real" bank accounts are involved there is no impact on your bank accounts.

Mike_James's avatar
Mike_James
Ultimate Cover User
4 years ago

Hi Mark299 , when you buy and sell one item at a time, if there was no stock on hand prior, the cost of each sale will be what the last purchase cost was, in your home currency. 

 

However, if you buy one item, and then immediately buy another, MYOB will then hold both items in stock and average the cost, so when you sell each item, the (average) cost would be $22.5 in your example. 

 

 In your second example, the inventory quantities will be correct, but:

- the sale to AUS by USA will generate a loss, 

- the purchase from USA by AUS will show a 100% margin

- this is probably unacceptable under transfer pricing regulations

- you need to determine a fair transfer price, probably including freight costs, then each side will report a portion of the margin. You should investigate which currency the transfer price should be set in.

 

 

  • Mark299's avatar
    Mark299
    Experienced User
    4 years ago

    HI Mike Thanks for the prompt reply and I thought this would be the case. Sometimes when you look at the profit and losses they didn't really make sense.

    I guess the answer is to get like for like in the transfers so they cancel each other out as a purchase and a sale.

     

    So if I transferred say 65 item A's in a sale to the USA at a value of $6,500  and then did the same transfer for item B (that cost more)  but there was less of them equal to the $6,500 value each item would retain it's own profit margin in each business.  

    The only thing is how we show that transfer of funds to each company withour having it transfer though a bank account 

    Maybe if I create a credit from each business (based on the sale) and then put the transfer in as a purchase and use the credit to cover the payment. That would show the right figures but would it satisify the "fair tranfer price agreements for each country?

    Any other suggestion?

    Thanks

     

    • Steven_M's avatar
      Steven_M
      Former Staff
      4 years ago

      Hi Mark299 

       

      The "fair transfer price agreement" is not something that I would be able to comment on.

       

      However, there was a question relating to closing off an invoice and purchase without the impact on the bank account. Generally in these situations, you want to use a contra/holding account and use the below process:

       

      1. Create a holding account if you don't already have one - Accounts>>Accounts Lists>>New - give the account a number, name and set the account type to be Bank.
      2. When ready to make payment, go to Sales>>Receive Payments>>Select the Deposit to Account to be that newly created account and then process the payment as per normal.
      3. Once that has been created, go to Purchases>>Pay Bills>>Select the Pay from Account to be that newly created account and then process the payment as per normal.

      What the above process will do is put the payment from the invoice into the holding account and uses those funds to pay off the purchases. As no "real" bank accounts are involved there is no impact on your bank accounts.

      • Mark299's avatar
        Mark299
        Experienced User
        4 years ago

        Hi Steven

        I think this will work. Even though I transfer he equipment between two separate MYOB accounts I should be able to apply a income and expenditure through both of the businesses and still maintain the correct payments.

        Thanks for the great idea

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