Thank you for being a part of the QuickBooks family, Omid.
It's crucial to accurately record the average cost of your items since incorrect COGS can lead to accounting issues. I can share some details to help resolve discrepancies and ensure the correct amount is reflected on the report.
The Average Cost of items is impacted by the inventory's cost of goods and the total number available for sale. In the Sales Item Summary report, COGS is only posted when the sale has been paid for. Therefore, it assumes the purchase of inventory is settled.
To pinpoint the miscalculation, run the Inventory Valuation Summary report to display the quantity and average cost for each item, supporting the balance on the financial statements once adjustments are made. I'll show you how.
- Navigate to the Reports menu, and hover your mouse over Inventory.
- Select Inventory Valuation Summary, then set the dates to all.
- Double-click on the item to view the Inventory Valuation Detail report, showing how QuickBooks calculated the item's average cost.
Additionally, since the average cost column is based on the purchases, sales, and adjustments made to an item, here are a few reasons why the details don't align with the financial statements:
- A transaction was directly coded to the inventory balance on the general ledger, bypassing the proper procedures such as entering bills, writing checks, creating cash sales receipts, creating invoices, or following the inventory valuation process.
- An inventory item still holds value but has been marked as inactive.
Moreover, discrepancies may come from a journal entry, purchase on a bill, or check coded through the Expense, instead of the Items tab, leading to a negative inventory. In this case, adjust the quantity on hand or revalue the item.
Furthermore, I highly recommend consulting an accounting professional before making inventory adjustments. They can elaborate more on the potential reasons and supplement other actions. Rest assured that this thread is open for other accountants or proadvisors that may join to guide you. If you don't have one, check out this link to find an expert nearby: Find ProAdvisor.
Here's an article on computing the average cost and managing inventory: Understand Inventory Assets and COGS tracking.
Explore these materials to dive deeper into their quantities and value:
Addressing your concerns is my priority. Click the Reply button below for any follow-up questions or clarifications about inventories. I'm here to help.
