The “Inventory on hand” is not functioning properly, and any new inventory purchases are being directly allocated to inventory costs. Please advise on an urgent solution.
This issue has to be quickly sorted out. Inventory is supposed to affect stock and not cost. It’s imperative it’s quickly corrected
you may read in guides:
https://www.manager.io/guides?inventory-revaluations
section ->> Managing Inventory: Balancing Costs and Assets
By default, when you use Inventory Items tab. All inventory purchases will debit your Inventory - cost expense account and all inventory sales will credit your Inventory - sales income account. This means even if own inventory, your Inventory on hand asset account will be always zero.
This approach is desirable for businesses that do not hold significant amount of inventory so they are not interested in capitalizing inventory costs on balance sheet.
However, if your business is maintaining significant inventory balances, it is often desirable to capitalize inventory on hand as asset. Inventory Revaluations tab will easily establish your Inventory on hand balances. Once average costs for your inventory items are specified, Manager.io will take your Qty owned figure and multiply it with your specified average costs. The result will be your Inventory on hand balance on Balance Sheet.