What the System Records
California's track-and-trace system assigns unique identifiers to plants and packages and records every movement, transformation, transfer, sale and disposal. It is a complete physical record of inventory maintained in parallel with the accounting system.
For accountants, that is an unusual gift: an independent quantity record against which the financial inventory can be tested every single period.
The Package Lifecycle
Packages are created, split, combined, adjusted, transferred under manifest, sold at retail, and finished when depleted. Each of those events should have a financial counterpart — a receipt at a cost, a transfer of cost between packages, a write-off, or a charge to cost of goods sold.
Where an event has no financial counterpart, a variance is created that grows until someone reconciles it.
- Package creation and cost assignment at receiving or production
- Splits and combinations that move cost between identifiers
- Adjustments requiring documented reasons and financial effect
- Transfers under manifest matched to invoices and receipts
Manifests and Transfers
Every inter-licensee movement travels on a manifest listing packages, quantities and the receiving licensee. Receiving should be a three-way match: manifest, invoice and physical count, with any discrepancy resolved before acceptance.
Accepting a manifest that does not match physical product creates a compliance record that contradicts your own inventory, which is the worst possible position in an examination.
Waste, Samples and Adjustments
Waste, destruction, quality-control samples and employee product all remove inventory physically. Each must also remove cost financially, with a documented reason.
Manual adjustments deserve particular scrutiny. An adjustment made to clear a compliance discrepancy without a corresponding journal entry is the single most common source of reconciliation drift.
Building the Reconciliation
The monthly reconciliation compares opening inventory, receipts, production, sales, waste and adjustments per track-and-trace against the general ledger inventory rollforward and the physical count.
Differences are classified as timing, documentation, costing, physical loss or system error, each with an owner and a resolution date. Signed workpapers are retained with the tax file.
