Revalue inventory to correct item costs

Sometimes an item's cost is simply wrong, or its stock is worth less than it cost, for example after a market price drop. A revaluation sets a new cost price and posts the change in the value of the stock to the books, so the stock accounts and the cost stay in step.

Before you start

• Agree the new costs with your accountant.

• Choose the two accounts the entry will use: a gain account for increases and a loss account for decreases.

• Each warehouse needs its stock account. A warehouse without one stops the revaluation.

Steps

1. Open Inventory › Items › Inventory Revaluation. The Revaluations list shows each revaluation with its number, date, branch, total adjustment and status.

2. Select New revaluation. The Create revaluation panel opens.

1. Choose the Branch whose stock you are revaluing and the Date of the entry.

2. Choose the Gain account and the Loss account.

3. Under Items, choose the Item and enter its New cost price. Select Add item for each further item.

4. Add Notes that explain the reason, for example the supplier price list or the count that triggered it.

5. Select Save. The message Revaluation created confirms it, and the revaluation appears in the list as posted.

What happens when you save

For each item, the system takes its stock in every warehouse of the chosen branch and works out:

adjustment = (new cost − old cost) × quantity in the warehouse

• A positive adjustment debits the warehouse stock account and credits the gain account.

• A negative adjustment debits the loss account and credits the warehouse stock account.

• All lines share one entry number, dated on the revaluation date.

• The item's cost price becomes the new cost, and the movement log records the revaluation.

• The revaluation receives a number such as REV-000012, and its Total adjustment shows the net change.

Example

An item holds 40 units in the main warehouse and 10 in the showroom, at a cost of 25. You revalue it to 22.

Things to know

• The entry covers the stock of the branch you choose. The item's cost price, however, is one figure for the whole company, so the new cost also applies to its stock in other branches.

• An item with no stock in the chosen branch is not changed by the revaluation.

• A revaluation is saved and posted in one step. To reverse it, post another revaluation back to the earlier cost.

Common questions

Why use a revaluation instead of editing the cost on the item? Editing the cost changes it without any entry, so the stock accounts no longer match quantity times cost. A revaluation keeps them in step and leaves an audit record.

Does a revaluation change quantities? No. To change quantities, use a quantity adjustment.