Inventory Adjustments can be confusing. You need to know how these work in GP. If you are importing inventory adjustment batches from other systems the way GP works will affect your methodology for designing the import and posting process.
The most useful screen to see this is Inquiry – Inventory – Receipts. Think of each line as a bucket of inventory. In the case of FIFO inventory GP will use up what’s in the first bucket and then move on the the next bucket.
The problem is adjustments that have a zero cost. GP will use the zero cost for any transaction that pulls that inventory from the bucket; Project Accounting, Sales Order, etc.
When you do a plus one adjustment for example in Transaction Entry, a new bucket or line in the Inventory Receipts would be created, with the cost that was used on the adjustment transaction in GP. So if you used zero that’s a problem. The on hand and available quantity is increased as you would expect.
What is interesting is that on a decrease adjustment you can’t enter a cost. Why? Because it adjusts the first bucket or line that it comes to in the Inventory Receipts with a quantity that is available to be used. That is, the quantity received is still less than the quantity sold. So a minus adjustment uses the cost that is on that bucket or line. Again, if it’s zero then we have a problem, mostly for GL in this case. The on hand and available quantity is decreased as you would expect.
Whey does the wrong cost show up on a Purchase Order?
In MS Dynamics GP there are several screens where you will see the cost of inventory:
1) Cards – Inventory – Item
- Standard Cost
- Current Cost
2) Utilities – Inventory – Adjust Costs
- Cost (which can be changed per line item for each receipt or adjustment)
3) Cards – Inventory – Item – (Go to button) Vendors, click Assign, then select the Vendor
Which cost is used when you enter a Purchase Order? Logically you might think the Current Cost from the Item Card might be used, or perhaps the last cost from the PO receipt line you see in the Adjust Costs screen.
The answer is the PO entry screen will always use the cost from the Originating Invoice Cost field regardless of how the Current Cost is set or modified in the other screens.
So for example I setup a new item and make the Current Cost $10.00. I then receive a PO for a vendor at $10.o0. In Current Cost, Originating Invoice Cost, and the Cost in the receipt line in Adjust Costs the cost is listed as $10.00. I then go into the Item Card and change the Originating Invoice Cost to $11.00. When I do a new PO for the vendor the cost on the line item displays as $11.00.
This is important especially if you buy from multiple vendors. Last year let’s say you bought the same item as above for $8.00 from an old vendor. If today you do a new PO for the vendor from last year the cost will default to $8.00. Thus you have the opportunity to process and post the receipt and invoice with the wrong cost.
You print the SOP Document Analysis report and notice that the cost for an item or items is zero.
You then check the Order or Invoice in SOP and find that the cost on item is zero as seen on Show Details expanded display or on the Sales Item Detail Entry screen. When the Invoice is posted General Ledger will have a zero cost in COGS.
First check Inquiry – Inventory – Receipts. Select the Item and Site. You may also enter a date range or leave the selection at All.
Check each line item or bucket for a zero cost. If you find a zero cost it means an inventory adjustment was made at zero cost or you have processed and recived a purchase order for the item with zero cost.
To fix the zero cost go to Tools – Utilities – Inventory – Adjust Costs. Enter the correct unit cost and Process. A journal entry will be created debiting inventory and crediting the inventory adjustment offset account.
If you have previously adjusted the GL accounts or you plan to make your own adjusting entry you can locate the batch in GL and delete the batch.
Example GL adjustment transaction created by the system when you process the cost adjustment above.