• From: Nepal, Patan
  • Registered: 12/04/2022
  • Posts: 1

Topic: Inventory Valuation, Standard Cost and Cost Update Bug

I have been using this software for more than a year. However, there is a substantial flaw in design of the Inventory Movements. The software uses average cost method, but, there is standard cost method to transfer the cost of inventory sold to Cost of Goods Sold GL. This standard cost is ever fluctuating and often negative. How is this possible if costing method is average cost method is used? The software is a headache when there is high volume stock in and out. Especially when goods are returned, the cost of the returned goods is automatic and I dont know how the cost is calculated.

Secondly, the standard cost is frequently negative and the auto cost update is a headache because of lack of trail. Why the inventory valuation rate is different than standard cost? Is standard cost calculated based on average cost? If yes then when the standard cost is manually updated, should not it affect the inventory valuation?

Can someone explain in detail how the inventory costing can managed and how to stop cost update.

P.S. accounting norms does not allow cost updates. Can this be made optional in system settings ?

2 Reply by MacKenzie (edited by MacKenzie 07/11/2024 10:04:00 pm)

  • From: USA, Raleigh, North Carolina
  • Registered: 01/07/2021
  • Posts: 69

Re: Inventory Valuation, Standard Cost and Cost Update Bug

STANDARD COST. 

When our client purchases an item, or several items, for sale, the price of the item is routinely ignored and the "standard cost" is used in the instead.  Inaccurate averages entered into the books of account is contrary to generally accepted accounting principles.  I am at a loss to understand why this method is being observed in FA.  The true "average costs" in this particular case are approximately $6.50 ea.  The Standard "calculated" Cost is $3.49, and the  $3.49 calculated average cost was used to debit COGS and credit Inventory.  This is a VERY SIGNIFICANT flaw and the system would not pass Audit.  What can be done about it?

I went back into the system to see what was going on.  I noticed that the AVERAGE PRICE had been re-calculated to something that was closer to actual prices. The problem is the POSTED GL ACCOUNTS still reflected the eroneous $3.49 cost.  MAJOR ERROR. HAS TO BE FIXED.

  • From: USA, Raleigh, North Carolina
  • Registered: 01/07/2021
  • Posts: 69

Re: Inventory Valuation, Standard Cost and Cost Update Bug

lomash_sht wrote:

I have been using this software for more than a year. However, there is a substantial flaw in design of the Inventory Movements. The software uses average cost method, but, there is standard cost method to transfer the cost of inventory sold to Cost of Goods Sold GL. This standard cost is ever fluctuating and often negative. How is this possible if costing method is average cost method is used? The software is a headache when there is high volume stock in and out. Especially when goods are returned, the cost of the returned goods is automatic and I dont know how the cost is calculated.

Secondly, the standard cost is frequently negative and the auto cost update is a headache because of lack of trail. Why the inventory valuation rate is different than standard cost? Is standard cost calculated based on average cost? If yes then when the standard cost is manually updated, should not it affect the inventory valuation?

Can someone explain in detail how the inventory costing can managed and how to stop cost update.

P.S. accounting norms does not allow cost updates. Can this be made optional in system settings ?


Did you ever get an answer concerning this?