COGS & correcting inventory amounts

no, a manual inventory change will not affect cost, and I don't think that it should. You paid a certain amount for the items that you received, and depending on the options you selected the cost is calculated - usually as a weighted average. Shrinkage is a different issue and although it reduces the value of your inventory on hand, it does not affect the value of an individual item. If you fix the inventory counts using a Physical Inventory, you will see a summary of the change in value due to differences between expected and actual counts. This will be a handy number to enter into your general ledger as an adjustment, but RMS won't enter it for you.

With manual adjustments, all you can track is that a change was made - using the item movement history report.

Not being an accountant, I may be full of hot air on this, but that's the way I see it...

Glenn Adams Tiber Creek C> Are COGS affected at all when one manually corrects an inventory quantity? >

I think your "hot air" is floating my proverbial accounting balloon.

Wait... I don't know what that means either...

What I am saying is that I tend to agree with Glenn. When you manally adjust the inventory, you will end up with a proper adjustment of the inventory value in the accouting system, whether manual or integrated. It will show up as shrinkage essentially. Either way, my opinion is that the inventory control system (RMS in this case) should always reflect an accurate value of the true known inventory.

To answer the original question, COGS will end up being a function of the accounting system. If you take the sales minus the change in inventory value, you will get COGS. COGS will include any inventory adjstments. In other words, having an accurate inventory value at all times is paramount.

The bottom line is that you should consult your accountant. This is the standard disclaimer - like when I "prescribe" taking lycopene for prostate health, you should cnslt your doctor.

Enjoy the ride...

Jas> no, a manual inventory change will not affect cost, and I don't think

If a Physical Inventory is only done yearly, yet I want to capture GL adjustments to inventory MONTHLY, can't I just "sell" missing items in the POS with a price of zero? That way it doesn't tender anything, but DOES adjust inventory AND tracks the the cost for the missing items when I generate a COGS report at the end of the month. It's very few items, so I won't be significantly screwing up my COGS figures.

Please let me know what you think of this approach.

Thanks for CCing me directly (please!).

Jas> I think your "hot air" is floating my proverbial accounting balloon. >

I do it all of the time when I know an item is broken or stolen or otherwise obviously "lost" from inventory. I believe this to be an effective way to accurately reflect COGS on a monthly basis.

The numbers should work. The only thing you don't get is an accurate shrinkage number at the end of the year. It is hard to track your inventory losses and to make business decisions based on this.

For that reason, I set up a customer called Invenetory Adjustments. When I do a zero-price "sale" I select this customer. Then I can look at sales to this customer and see exactly what my inventory losses are costing me.

Hope this helps...

Jas> If a Physical Inventory is only done yearly, yet I want to capture GL

I do it all of the time when I know an item is broken or stolen or otherwise obviously "lost" from inventory. I believe this to be an effective way to accurately reflect COGS on a monthly basis.

The numbers should work. The only thing you don't get is an accurate shrinkage number at the end of the year. It is hard to track your inventory losses and to make business decisions based on this.

For that reason, I set up a customer called Invenetory Adjustments. When I do a zero-price "sale" I select this customer. Then I can look at sales to this customer and see exactly what my inventory losses are costing me.

Hope this helps...

Jas > If a Physical Inventory is only done yearly, yet I want to capture GL > adjustments to inventory MONTHLY, can't I just "sell" missing items in the > POS with a price of zero? That way it doesn't tender anything, but DOES > adjust inventory AND tracks the the cost for the missing items when I > generate a COGS report at the end of the month. It's very few items, so I > won't be significantly screwing up my COGS figures. > > Please let me know what you think of this approach. > > Thanks for CCing me directly (please!). > > > Jason wrote: > > I think your "hot air" is floating my proverbial accounting balloon. > >

Olybikes, have you considered doing weekly/monthly cycle counts for a single department? Sometimes cuts down on employee "shrinkage"

Jason, the problem you will have is that your "Inventory Adjustment" customer doesn't show _just_ this year's COGS.

A better option might be, is to set up a Reason Code for Inventory adjustments, then select Prompt and Require a reason code for manual adjustments in the Reason Code Options section. Then modify the item's quantity direct in the properties. If you are posting to QB, it will post to the same GL account as your Physical Inventory adjustment will.

To see your cost for any timeframe, run the standard Item Movement Report and filter on your timeframe and Adjusted 0. This will show any items adjusted for either.