I hope someone is able to explain the accounting logic behind some entries being posted by Adjust Cost. We are using Navision 4 Service Pack 3, and have expected cost posting set up, but have the interim inventory account and inventory account as the same account.
My question is best explained by way of example.
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receive 100 units of item at standard cost 1.00 - debits inventory and credits GRNI with 100.00 (expected cost)
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revalue item to 1.10 - debits inventory and credits inventory adjustment with 10.00. Inventory account balance now 110.00
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invoice the 100 units received at 1.05 per unit - reverses expected cost posting (debit GRNI and credit inventory with 100.00), then posts at “actual” (debit inventory 110.00, credit vendor 105.00 and credit MPV 5.00)
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this leaves inventory “out of balance”: on hand * standard cost = 110, but inventory account balance is now 120.00
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Adjust Cost then resolves this with an entry that credits inventory and debits inventory adjustments with the 10.00
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the receipt entry is now considered as “completely invoiced” and no further adjustments are made when the item is consumed by manufacture
I don’t understand the accounting logic behind the Adjust Cost posting. Shouldn’t the 10.00 have been posted to MPV (item received at “old” cost)? Taken at face value, the Adjust Cost entry implies that the revaluation process over-valued interim inventory because the entry is reversed. The alternative is that GRNI is understated after revaluation.
The problem that we have is that inventory revaluation is done at the very end of a financial year, and we need to make provision for these adjustments - without understanding fully what Adjust Cost Entries will occur in the new financial year.