Balance Location Costing Group Accounts
If you use the Multi-Location Inventory and Group Average Costing features, you can process account adjustments. These adjustments ensure that item costs are consistent within costing groups so that location balance sheets are accurate for group average cost items. When you balance location costing group accounts, costing adjustments update individual location inventory values to match the group average cost.
Group average costing lets you track the average cost for an item across locations using location costing groups. The Balance Location Costing Group Accounts page enables you to periodically adjust location inventory accounts for group average cost items. Doing so ensures that the inventory account balance at each location calculates accurately as (location quantity) x (group average cost).
Keep location accounts in sync. Use the Balance Location Costing Group Accounts page to examine all transactions for each location in a costing group. Transactions are examined from the point in time that the most recent previous adjustment was run. Based on these transactions, NetSuite determines the appropriate account variance and posts a cost adjustment to the general ledger. After all positive and negative adjustments post, location costing group accounts should balance close to zero, depending on rounding.
This adjustment page provides visibility into general ledger inventory account adjustments across locations. Visibility provides the impact of managing an item’s cost across a company. As in the following diagram, without entering an adjustment, costs across locations might not balance.
Refer to the image above related to these details:
-
The Group Average Costing method is defined on the item record.
-
Locations are assigned on the Location Costing Group record.
-
The group average cost for an item is calculated as follows:
= total inventory account value across all locations / total quantity across all locations
-
The location average cost for an item is calculated as follows:
= location inventory account value / location quantity
Note:When a transaction affects inventory costing for a Group Average cost item, NetSuite calculates an average cost across all locations in the costing group. That group average cost is assigned as the cost for that item in all the locations.
In the preceding diagram, each location receives the item at a specific cost:
-
Location 1 = $6.00
-
Location 2 = $3.00
-
Location 3 = $7.00
For a specific location, the total in the inventory asset account is based on the receiving cost specific to that location. (Receiving cost x Quantity received) That inventory-specific asset cost amount might not equal the average cost calculated for the group. Therefore, the inventory value for a specific location might not equal the calculated value. (Quantity at the location x Group average cost).
The average cost for each location might be different across locations, and can be different from the Group Average Cost. NetSuite calculates average cost as (Account Value / Quantity).
Using the Balance Location Costing Group Accounts page, general ledger adjustments balance accounts across locations.
Refer to the preceding diagram related to the following details:
-
The Group Average Costing method is defined on the item record.
-
Locations are assigned on the Location Costing Group record.
-
The group average cost for an item is calculated as follows:
= total inventory account value across all locations / total quantity across all locations
-
Balance Location Costing Group Accounts to post general ledger adjustments that balance accounts.
-
The location average cost for an item is calculated as follows:
= location inventory account value / location quantity
Use the Balance Location Costing Group Accounts page to adjust inventory at the end of a period you select. You should use this page to adjust inventory when you close a period. If you choose, you can perform this more often, such as updating account balances weekly.