Inventory Items Revaluation/Depreciation


which is the best solution to have a Revalutaion/Depreciation of inventories. In an investment fund every semester you have a survey of each inventory and, as a result, an open market value. If the OMV is different from the current value of the inventory you have to do an adjustment with a revalutaion/depreciation in order to reach this value. I would like each inventory to be linked to his revaluation or depreciation. How would you operate?

Thanks a lot


Do you need to have these valuations adjustments noted separately on the BS or as part of the Inventories.

To link them in a fashion you could duplicate the inventories like in the following.

This would put the adjustment values as part of the Inventories, however if the adjustment value is to noted separately on the BS, then create a BS custom control account made up of Inventory and nominate that control account within the -A inventory items.

That is a good way thanks. Then if I sell part of the inventory I can also aggregate each couple of items with a bill of quantity and cut down automatically both the items. Great!

Another question, how would you insert the adjustment data into the adjustment inventory item? Would you make a fake buy from a fake seller? I don’t think it will work in this way because you would have a debt towards him forever since you will never receive money…

No need to do such fancy footwork. When you sell, just reverse the valuation adjustment entry and sell only from the Inventory cost item.

Via a Journal Entry, first you have to create under BS Equity an account called “Inventory Valuation Adjustment”, then in the Journal debit/credit the Inventory -A Item and put the opposing debit/credit to that BS Equity account.