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<< Click to Display Table of Contents >> IVCOADJ Inventory Cost of Sales Adjustments |
  
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IVCOADJ Inventory Cost of Sales Adjustments
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<< Click to Display Table of Contents >> IVCOADJ Inventory Cost of Sales Adjustments |
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Moving Average Cost
A cost of sale adjustment to inventory mainly occurs when inventory quantity reaches zero or previous stock on hand is negative, as the moving average unit cost is reset to the unit cost on the latest receipt. The receipt line cannot be deleted if a cost of sale exists. The cost of sale adjustment value is held on the stock receipt line.
| 1. | New Stock on Hand is zero |
Inventory is receipted in resulting in positive inventory balance. The previous inventory holding prior to the receipt is sold. The inventory receipt is subsequently reversed. When the stock receipt is reversed the new stock on hand will go back to zero. Any difference between the stock receipt value and the closing inventory value prior to the reversal will be posted to the cost of sales adjustment account.
Transaction Description |
Quantity |
Unit Cost |
Inventory Value |
Opening Stock |
8 |
500 |
4000.0000 |
Stock Receipt |
28 |
628 |
17584.0000 |
Closing Inventory |
36 |
599.55555 |
21584.0000 |
Sale |
(8) |
599.55555 |
- 4796.4444 |
Closing Inventory |
28 |
599.55555 |
16787.5556 |
Rev Stock Receipt |
(28) |
|
-16787.5556 |
0 |
599.55555 |
0.0000 |
The difference between the original receipt and the closing inventory value is posted to inventory and cost of sales adjustment
Original Receipt 17584.0000
Closing Inventory -16787.5556
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Cost of Sales Adj 796.4444
General Ledger Posting
Dr Inventory 796.44
Cr Cost of Sales Adj - 796.44
2. Previous SOH <0 and Quantity Change >0
If the closing inventory value is negative prior to the stock receipt transaction and the quantity change is positive the new inventory moving average cost is based on the unit cost of the latest stock receipt. When the unit cost of the receipt is not the same as the current moving average cost, a cost of sale adjustment will result.
Transaction Description |
Quantity |
Unit Cost |
Inventory Value |
Opening Stock |
8 |
500 |
4000.0000 |
Receipt |
(28.8) |
628 |
- 18086.4000 |
Closing Inventory |
(20.8) |
677.230769 |
- 14086.4000 |
Reverse Receipt |
28.8 |
|
19110.4000 |
Closing Inventory |
8.0 |
628 |
5024.0000 |
The stock receipt has been reversed at the value of the difference between opening and closing inventory. The closing inventory has been valued at the latest unit cost of $628.
The difference between the original receipt and the closing inventory value is posted to inventory and cost of sales adjustment
Original Receipt - 18086.40000
Closing Inventory 19110.40000
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Cost of Sales Adj 1024.00000
General Ledger Posting
Dr Inventory 1024.00
Cr Cost of Sales Adj - 1024.00