GL Costing Setup for Inventory Counts

Before creating Cycle Counts or using the Physical Inventory Import, there are a couple items to set up:

  • Select which GL Expense Account will offset the entry to the Inventory Asset Account when an adjustment is made.
  • Select the Costing Source that will be used to determine the dollar value for inventory draws.

1. Select the expense account to use for Inventory Adjustments

  1. Navigate to Administration ➤ System Configuration and select Inventory from the drop-down menu.
  2. Double-click the setting for Physical Inventory Import Offset Account.
  3. Select the expense account to use. There are two choices:
    • System Default: This is the GL account entered above in System Setup ➤ Inventory & Marketing.
    • Product Class/Warehouse COGS: This is the GL Cost Acct Code entered on each Product Class. This account can be different for each Product Class + Warehouse combination.
  4. Click OK to save.

The GL account selected here will be charged with a DEBIT for inventory DRAWS or a CREDIT for inventory ADDS.

System Configuration - Inventory 1

1.1. System Setup default External Inventory Adjustment account

This account will be used if you select System Default as the Physical Inventory Import Offset Account (see above).

  1. Navigate to Administration ➤ System Setup and select the Inventory & Marketing tab.
  2. Enter the External Inventory Adjustment account. You can use any expense account for this purpose.
  3. Click OK to save.
System Setup - Inventory & Marketing

1.2. Product Class/Warehouse COGS account

To see which account(s) will be used if the Product Class/Warehouse COGS setting is selected as the Physical Inventory Import Offset Account (see above), navigate to Warehouse Management ➤ Product Classes and then drill into the Product Class records to see the GL Cost Acct Code.

Please note that this account can be different for each Product Class + Warehouse combination -- this would be a more granular costing approach vs. using the single system-default account.

Product Class - detail

2. Select a Costing Source for Inventory Adjustments.

Now that you've selected the GL account for inventory adjustments, the next step is to select which cost source to use.

  1. Navigate to Administration ➤ System Configuration and select Inventory from the drop-down menu.
  2. Double-click the setting for Physical Inventory Import Cost Source.
  3. Select the cost source to use. There are four choices:
    • Default PO Cost: This value comes directly from each Product record.
    • Current Average Cost, Count Warehouse: The current average cost of the Product in the Warehouse where the count is taking place.
    • Current Average Cost, All Warehouses: The current average cost of the Product across all warehouses.
    • Most recent Maintenance Add Cost, Count Warehouse: The system will use the cost from the most recent Inventory Maintenance ADD transaction.
  4. Click OK to save.
System Configuration - Inventory 2