1. SCM (Supply Chain Management)
  2. Item Record Management
  3. Item Costing

Item Costing

If you use both the Accounting and Inventory features, you need to track the total value of your assets and to calculate profits you make. You can set up and use your NetSuite account to track inventory costing, which are the costs associated with goods and services you sell.

Each time you buy and sell inventory items, you need to track the cost of your items throughout the purchase and sale processes. The cost of an item you buy or sell affects accounts in your general ledger.

Cost of Goods Sold (COGS) and the General Ledger

A Cost of Goods Sold (COGS) account is not an expense account, but it functions like an expense account. When calculating your company's gross profit, the inventory costing total is subtracted from the income total before expenses.

The cost of an item is associated with income and expenses (overhead) and are not directly associated with the sale of an item.

Item Cost

Item cost is determined by the price of the item that shows on the purchase order.

When you determine the cost of an item, account for costs associated with buying the same items at different purchase prices over time. For example, sometimes you pay your vendor $10 for each calculator. Other times, the price is $15 for each calculator. You can choose a costing method to determine how NetSuite handles these variances.

The exact cost assigned to an item depends on the costing method you choose. For more information, see Setting a Default Inventory Costing Method and System Cost of Goods Sold Adjustments.

Inventory Costing Preferences

Make selections to determine your preferences for handling inventory costing. For more information, see Setting Inventory Costing Preferences.

Costing and Verifying Decimal Precision

Inventory costs are calculated and reported at a level of decimal precision that is based on the format for the chosen currency.

The level of decimal precision indicated in the Format field of a currency record is used for inventory costing calculations and cannot be changed. This maintains consistency between inventory costing and reporting.

For example, you selected USD (United States Dollar) as the currency for an item on the item record and the format is USD. The decimal precision for that item's costing and reporting is two decimal places.

Note:

Standard Costing is an exception. Standard Costing calculations are performed with decimal precision to seven places. For example, 9.87654321 is calculated as 9.8765432. For more information, see Standard Costing.

To verify the decimal precision for a currency:

  1. Go to Lists > Accounting > Currencies.

  2. Click the name of the currency.

    The selected format shows in the Format field.

    The decimal precision for that format shows in the Format Sample field.

Related Topics

General Notices