I have to write some inventory off as a donation, when i enter the figures in. The write off cost is not the actual cost of the Item, it is the average cost of the item. How do I change it to show the true cost price.
An Inventory Item has an average cost, when it has been purchased at different actual costs.
To write off the Inventory and to record it as a Donation, then you should use a Journal so that the cost ends up in the Donation expense account. When you use a Journal you can use the values required.
However, if you donate the inventory at a price which is different to the average cost, then any remaining Inventory may end up with a different average cost.
But, if the donated inventory will leave a zero quantity balance then the average cost should be used otherwise you may leave a residual value against a zero quantity.
Also, donating an inventory item at a cost different from the average cost may have tax consequences. If the donation is an allowable tax deduction, you would be claiming that deduction at a different cost than your accounting records showed. If higher, you would be artificially lowering your net income. If lower, you would be raising your income and paying more tax than necessary.
Note, these comments are made from Manager’s perspective of using the average cost method of valuing inventory. The situation could be different with other valuation schemes.