Hi, I would like to know how to decrease or increase the average cost shown under items (while doub
Hecham Coffee
Member Posts: 1 ✭
Hi, I would like to know how to decrease or increase the average cost shown under items (while double clicking on items)
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Dear Hecham Coffee,
Are you referring to the Average Cost of Goods Sold?
This figure is usually only modifiable by purchasing the item at different rates - for example, buying 100 units of an item at $1 makes the average $1, but purchasing 100 unites of the same item at $3 will now make it average at $2, due to the difference of prices.
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Howdy - the best way to explain is with an example, remembering that average cost only works for inventory items..- lets say your an item called 1kg coffee beans... and your Reckon currently says you have 10 units and the average cost is showing when you click on the item - as $5 (this is probably unrealistic but given I don't drink coffee, I have no idea!)... but lets say the true average cost that you want it to show is $10 per unit? lets assume that the 10 units you have on hand is correct... its just that somehow the average cost has gotten out of wack... the way to correct this is:
Go to Items - Adjust Quantity/Stock on Hand - put in the date that this change is applicable from - give it a reference - eg correct average cost or similar - put in the adjustment account - which will either be the COGS account you use for that item - or a Stock discrepancy/adjustment account under Cost of Goods Sold (remembering the other side of the transaction will be the Stock on Hand account)... then find you 1kg coffee beans - it should say that there are 10 and the value is $50 - put a tick in the box at bottom left for Value Adjustment and now enter 10 as the quantity but $100 as the value... this will have the effect of DR Stock on hand by $50 and CR Cost of Goods Sold b y $50 - and when you save this - your average price for this item will now be $10...
This is why a stocktake routine shouldn't just count stock numbers and adjust those - it should also be checking stock values - when entering the Adjust Qty/Stock on Hand entry for a stocktake - you should be amending both the quantity and the total value of the stock - so that your average prices are corrected...
How does average price get out of wack you say? it comes down to the quality of your data entry - garbage in = garbage out...and there are many different ways this can go astray... at the end of the day - the only accurate reconciliation you can do is to work out the true value of your stock - once you have this showing correctly on your balance sheet - then the fall out into the Cost of Goods Sold - will be whatever it needs to be... you cant create value out of thin air - so freebies/discounts/giveaways etc will always affect the average price of your stock and your ultimate returns. Hopefully this makes sense?0
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