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Adjustment Code
Adjustment Code
The adjustment code is a coded representation of the reason a credit or debit memo is issued. For example, an adjustment code can indicate that a customer credit should be processed because a part was damaged in transit.
The operator must enter a credit (debit) adjustment code for each line item in the Postbilling and Debit/Credit Memo Entry conversation. The line defaults to the value that was entered on the header screen. The system validates the entered code against values defined on the Reference File.
If the adjustment code is valid, the system retrieves the decoded description from the Reference File. Invalid codes are highlighted on the screen, and the operator must then enter a valid code before the system will accept the line.
In addition to carrying the decode, the Reference File indicates which statistics (sales, cost of sales, and inventory) are to be adjusted for each adjustment code. The table below lists five commonly used adjustment codes.
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Inventory
Balances
(On-Hand)
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Goods returned and scrapped.
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Credit
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Decrease
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Decrease
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No Change
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Goods returned and restocked.
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Credit
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Decrease
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Decrease
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Increase
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Overpriced part but not returned.
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Credit
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Decrease
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No Change
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No Change
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Underpriced part but not returned.
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Debit
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Increase
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No Change
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No Change
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No charge sale--returned to stock.
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Credit
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No Change
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Decrease
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Increase
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Sample Adjustment Codes
The adjustment codes in this table can be subdivided for detail analysis while having the same effect on the statistics. For example, the first type could be coded 10 for "WAREHOUSE ERROR-WRONG PART SENT" or 11 for "SALESPERSON ERROR-WRONG PART SENT."
Considerations
The adjustment codes provide users with a wide range of processing options and should be assigned carefully. If a company has a policy to inspect and segregate returned merchandise, the second sample adjustment code shown above would be inappropriate because it automatically updates inventory at full cost. This code should therefore not be set up on the Reference File.