Questions on Inventory and Average Cost

Datarec

Q1. If Reckon calculates stock value using Average Cost, what is the purpose of the Cost/Sell price fields?

✔ Answer:

• Average cost = actual cost Reckon uses for valuation and COGS.
• Cost price in the item card = a default amount used when entering purchase orders or bills.
  • It does not determine actual inventory valuation.
  • It does not change COGS. [community.reckon.com]

📌 Example

You buy a product:

• First time: $100
• Next time: $150
• Total qty on hand: 2
• Average cost = (100 + 150) / 2 = $125

Even if the Cost field in the item card says $120, Reckon still uses $125 when you sell it.

Q2. If I change the cost price inside the item record (e.g., increase it), does this cause issues?

✔ Answer:

No—changing the item’s cost field does not affect:

• inventory value,
• average cost,
• COGS,
• profit calculations.

If your average cost is wrong, the only correct way to fix it is:
👉 Inventory Activities → Adjust Quantity/Value on Hand [community.reckon.com]

📌 Example

Say the average cost incorrectly shows $200 but should be $140.

• Changing the Cost field to $140 does nothing.
• You must do an inventory value adjustment to set the correct value.

Q3. Does the (incorrect) Cost field affect Profit Margin or GST/BAS reports?

✔ Answer:

No.

• Profit Margin uses:
  • Sales price – Average cost.
• GST/BAS uses actual purchase transactions (e.g., bill amounts).

The Cost field is simply a default and not used for reporting.

[community.reckon.com]

📌 Example

Item shows:

• Cost field: $100
• Average cost: $125
• Sale price: $200

Profit calculation:

• COGS = $125 (not $100)
• Gross profit = $200 – $125 = $75

Q4. Does the cost field matter at all?

✔ Answer (simplified):

Not for accounting — only for data entry convenience.

What does matter is:

• Average cost,
• Stock on Hand,
• Actual purchase costs on bills. [community.reckon.com]

⭐ Big Takeaways (Easy Summary)

• Reckon uses Average Cost for all real accounting calculations.
• The item’s Cost field is only a default entry helper.
• Changing the item’s cost does not fix wrong average costs.
• To correct costs or stock value, always use Adjust Quantity/Value on Hand.
• Profit, GST, and COGS calculations rely on real transactions and average cost, not the cost field.

Based on: inventory adjust - Reckon Community