I need to write down 6 or 7 fertilizer products to their year-end market value. The only way I know to do this in agrē is to adjust the inventory to zero and to make another adjustment putting it back in at the market price. I don’t want anything “left over” after we adjust the quantities to zero that will distort the value after we re-enter the quantities (which should be the market value as of Dec 31 last year).
Inventory adjustments are one way to do this in agrē, but not the only way. In fact, in this situation, using inventory adjustments is probably not the ideal solution because an inventory adjustment only works to change the cost of “what is sitting outside right this minute” – i.e. when you adjust inventory out, you take inventory from your current on-hand amounts, and adjust it out, then you adjust it back in and change the cost.
If you need to adjust the cost of product that is no longer sitting outside, a better strategy for inventory write downs is to do a cost adjustment on the inventory.
To create a cost adjustment for Inventory Write Downs:
Create a new 'internal' supplier – this will be a administrative entity (because the internal supplier is really ‘yourself’)
Create a new Purchase Invoice for the Internal Supplier and go to the Cost Adjustment tab.
Find the inventory receipt (or other incoming inventory transaction like a location transfer or inventory adjustment) for the product that should have its costs adjusted.
Create a cost adjustment to reduce the cost of that inventory to the value you wish it to have.
Repeat for each inventory transaction you need to adjust.
Go
to the non-inventory tab of the same PI, and add a row that balances
out the value of the cost adjustments using the inventory
write-down GL account so that you end
up with a zero dollar PI.
(e.g. if the total value of cost adjustments is $10,000, create a non-inventory
row using the write-down GL account for -$10,000)
This way, all the inventory that came in at the high cost is adjusted to use the low cost. No inventory had to be ‘moved out and back in’, you just changed the cost on product you had already bought.
The only constraint with cost adjustments is that you cannot change the costs on things that reach back into a closed fiscal year.
The inventory adjustments are being dated for Dec 31, but if a purchase invoice has been processed after that date, the system will use the cost of that purchase invoice (as it is the last cost in the cost history table), even though the adjustment is technically happening before that Purchase Invoice.
An inventory adjustment can only affect inventory that is presently sitting outside. Inventory adjustments move inventory, just like Loadout Tickets or location transfers – so they use up available cost history. The key word there is available: once a cost history row has been used, it’s not available anymore, you can’t move it again … although you can cost adjust it.
Say we brought in 100 units at $15 each. Then we sold 20 units, and now we have 80 left. If I decide now that I want to change the value of those 100 units from $15 to $5, an inventory adjustment is only going to be able to affect the 80 units that are sitting outside (because those are still ‘available to be moved’). An inventory adjustment at this point which adjusted 100 units out would take the remaining 80 units away (using up their $15 cost rows), but would also create an ‘inventory deficit’ of 20 rows, which sit there waiting for new costs.
If what you wanted to do was change the cost value of the 100 units (whether they are still here or not), then you need to do a cost adjustment. A cost adjustment will reach back and say “okay, we originally said we got 100 units at $15, but now we are changing that value to $5 … go find all the transactions that used the $15 and change it”. An inventory adjustment can’t do that, but a cost adjustment can.
When you make an adjustment to bring the quantity of an inventory item to zero, using the last cost does not always get rid of the value of the inventory. In some cases a value will remain, but how can there be a value to an inventory item with a quantity of zero? Instead when adjusting the inventory to zero the average cost of the inventory would need to be used to completely wipe out the dollar value.
Using inventory adjustments to bring the quantity to zero should get rid of the value of the inventory, but this will only work ‘as of today’. You cannot effectively ‘reach back in time’ with inventory adjustments, because once cost rows are used up, they are used up.
Going back to our 100 units at $15 example: say the receipt happened on Monday, and then 20 units were sold on Tuesday. It’s now Friday and we want to change the value of the product. If we do an inventory adjustment backdated for Monday, it would seem that we ought to be able to ‘grab’ those 20 units before they were sold. However, FIFO doesn’t 'do' time travel … FIFO deals with what is in the cost history tables as of now – on the assumption that activity generally happens in the system in the same order that it happens in the real world … we don’t want to re-jig the entire cost history table every time someone backdates inventory activity. So, if we reach back in time and adjust 100 units out on Monday … here’s what we are working with:
Cost history tables as of Friday:
Monday 100 units in at $15
(80 units remaining)
Tuesday 20 units out at $15
Now we go insert a row on Monday to move 100 units out on Monday:
Monday 100 units in at $15
(zero units remaining once the adjustment is done)
Monday 20 units in the hole, waiting for costs (because 100 units moved
out but we didn’t have 100 available)
Tuesday 20 units out at $15
Then we move 100 units in at $5 on Monday:
Monday 100 units in at $15
(zero units remaining because the adjustment took them out)
Monday 20 units that were waiting are now costed at $5
Monday 80 units in at $5 (the rest of the 100 that we brought in)
Tuesday 20 units out at $15
If we'd done a cost adjustment done on the 100 units, that would have triggered the re-costing cascade and recosted all prior postings.
I want to see examples of Inventory Current Value
I want to see examples of Inventory Cost History
I want to find the dollar value of Inventory Adjustments