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Cycle Count and Physical Inventory

You can use cycle counting and physical inventory to correct your inventory on-hand balances.

If you physically count more than your on-hand balance, the accounting entries are as follows:

Account Debit Credit
Organization Valuation accounts @ current average cost XX  
      Adjustment account @ current average cost   XX

If you count less than your on-hand balance, the accounting entries are as follows:

Account Debit Credit
Adjustment account @ current average cost XX  
      Organization Valuation accounts @ current average cost   XX

The accounting entries for physical inventory adjustments are the same as those for cycle counts.

Suggestion: Since the quantities, not the average cost, is kept when you freeze the physical inventory, you should not perform any transactions that might affect your average costs until you have adjusted your physical inventory.

Expense Subinventories and Expense Items

The system does not record accounting entries when physical inventory or cycle count adjustments involve expense subinventories or expense items. However, quantity balances in expense subinventories are corrected if the quantities in these subinventories are tracked.

See Also

Overview of Cycle Counting

Entering Cycle Counts

Overview of Physical Inventory

Processing Physical Inventory Adjustments

Average Cost Update

You can view and update the average cost of an item by cost element and level (this level and previous level). You can update average costs using a percentage change, a new average cost, or a value change. A change made to the total unit cost of an item is spread to all cost elements and levels in the same proportion as they existed before the update.

The offset to the inventory revaluation in all cases above will be booked to the Average Cost Adjustment account(s) you specified at the time you perform the update.

Note: The average cost update feature is intended to be used sparingly to correct a transaction costing error affecting items in subinventory. If the cost error is in WIP, the impacted quantities will need to be returned to a subinventory, corrected there, then reissued to WIP after the update has been completed.

See Also

Updating Average Costs

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