I took a physical count of my inventory items for year end.
Some items I have less than the system balances, some items I have more than the system balance.
I can do an inventory write-off for the items where I need to reduce the quantity in the system, but how do I account for the items where I need to increase the quantity? I tried using a negative inventory write-off but the system completely ignores the entry.
In the case of write-ups, use a Journal. Debit the Inventory item and credit a COGS “expense” account, unfortunately you can’t select the “Inventory Cost” account itself.
If Inventory Write Off was changed to Inventory Adjustment - then it could allow for write ups as well as write downs.
So with this method I would have to figure out average cost first. There has to be another way to do this. My average cost is a few decimal places out and manager doesn’t show anything other than 2 decimal places for average cost.
Don’t despair. There is actually a way to trick the program. Using a journal entry, allocate the first line to Inventory on hand => Inventory item. A Quantity field will appear. Enter the quantity change (positive, since you are adding to inventory). Leave the debit and credit amounts blank. Delete the second line or just leave it blank.
The on-hand quantity will go up, and the average cost will be automatically recalculated. While you might think the program won’t allow this because of the requirement for balanced transactions, the sum of all debits is zero, the sum of all credits is zero, so it balances.
I do agree with @Brucanna, though. It would be better to revise the module to be Inventory Adjustments and have a single, straightforward process.
The system isn’t going to recalculate all my cost of goods sold for the year based on the new average cost, correct? It should only use the new average cost when new transactions are added as long as they are dated AFTER the journal entry date.
Correct, the Journal is no different to adding a Purchase Invoice (in fact you could create a zero value Purchase Invoice and get the same result - but I wouldn’t)