PPV is not reversed when issuing a Purchase Return Credit Memo in Dynamics NAV

I received a question the other day from a client who said that they received a ‘Standard Cost’ item, and when invoiced, it created Purchase Price Variance. The item was later returned and a Purchase Credit Memo was issued and posted, but the PPV was not reversed.

I have set up the following example to illustrate:

Figure 1 – Screenshot showing an example of a standard cost item of $2.00

I created and posted a purchase order with the cost of $3.00. This resulted in a Purchase Price Variance of $1.00:

Figure 2 – Screenshot of a posted purchase order with the cost of $3.00, resulting in a Purchase Price Variance of $1.00

I then created and posted a Purchase Credit Memo, which created the following General Ledger entries:

Figure 3 – Screenshot of General Ledger entries created after posting a Purchase Credit Memo

You can see that the Purchase Price Variance has not been reversed and that it has left the Purchases Account and Direct Cost Applied Accounts with a different balance.

Please see my previous Blog on Exact Cost Reversing.

I again created a posted a Purchase Order to get the same Purchase Price Variance of $1.00.

Figure 4 – Screenshot of a posted a Purchase Order, resulting in the same Purchase Price Variance of $1.00

To reverse the Purchase Price Variance in a Purchase Credit Memo, you must select the ‘Applies to Item Ledger Entry’ that created the original Purchase Price Variance.

Figure 5 – Select the ‘Applies to Item Ledger Entry’ to reverse the Purchase Price Variance in a Purchase Credit Memo

Now when the Credit Memo is posted, the Purchase Price Variance is reversed.

Figure 6 – Screenshot showing that the PPV is reversed when the Credit Memo is posted

For more information on this or any other Dynamics NAV topic, please contact ArcherPoint.

Read more blogs by Bob Bergman for practical advice on using Microsoft Dynamics NAV.