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Inventory valuation

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Posted on by MB-10021509-0

Hi all,

i have this situation:

- i buy an item on 9/15 fo 100€

- on the same day i ship the item

- i post the purchase invoice on 10/1 with an amount of 110€

Then i run the item cost adj report and i obtain these values entries:

The costing method of the item is average.

Here is the inventory valuation with end date 09/30/2025, since my customer want to know the value of the inventory at the end of the month.

How can i explain that negative amount to my customer? I have to post the purchase invoice in October for VAT reason.

Is this correct?

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Dynamics 365 Business Central

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Nimsara Jayathilaka. 4,950 Super User 2026 Season 1 on at

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Hi

The negative amount issue arises because the purchase invoice is posted after the shipment date, creating a timing mismatch in inventory valuation. When the item is shipped on 9/15 at 100€, but the purchase invoice is posted later on 10/1 at 110€, the system initially values the inventory at the original cost of 100€. Once the purchase invoice is posted, it retroactively adjusts the cost to 110€, causing a negative adjustment in the previous period's valuation since the invoice was not posted at the same time as the shipment. This results in a negative value in the inventory valuation report for the period ending 9/30, which reflects the difference between expected and actual costs due to the delayed invoice posting.

To fix this, the recommended approach is to ensure purchase invoices are posted as close as possible to the date of receipt or shipment to maintain alignment between physical movements and financial postings. If the invoice posting must be delayed for VAT or other reasons, then communicate clearly to the customer that the inventory valuation temporarily shows discrepancies due to timing differences. Some systems offer mechanisms like expected cost posting to mitigate the impact of delayed invoices by including expected costs in valuation without creating negative adjustments. Alternatively, adjusting internal accounting procedures to recognize estimated costs when shipment occurs can prevent these negative valuations and maintain consistent inventory values until the actual invoice is posted.

Thanks

Nimsara

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RockwithNav 8,959 Super User 2026 Season 1 on at

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Long explanation sort is, you will have this scenario if there is a marginal gap in Invoice posting. Either do it at the same time to get this in sync with automatic cost posting ON or else you need to explain the same story every time that Invoice was not yet posted hence you have this figure.

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YUN ZHU 99,086 Super User 2026 Season 1 on at

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Customers want to know the cost of their purchases?

Is it not okay to just tell him the Unit Cost on the item card?

Hope this can give you some hints.

Thanks.

ZHU

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Pallavi Phade 5,420 Super User 2026 Season 1 on at

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Namaste ,

IF purchase invoice is booked post Sales invoice , the cost will be negative side as purhcase is not booked .

Below is calculation how unit cost lands up in Sale Invoice . And customer can get the infromation of cost per unit .

Unit cost is updated on Sales lines based on item Card . This unit cost is populated as cost per unit in value entry and which is reflected in inventory valuation report .

Value Entry

Cost Per unit is unit cost from Item Card .

Item Card

Unit Cost is average calculation of trasnactions done . Which you can get on drill down in item Card

You can refer the below link for more clarity .

https://learn.microsoft.com/en-us/dynamics365/business-central/finance-about-calculating-unit-cost

If you feel this is helpful , please verify the answer

Regards

Pallavi Phade

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Andrés Arias 5,166 Super User 2026 Season 1 on at

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Hello,

The cost of the product is listed on the product page.

Could you indicate the cost generated by BC? It would also be helpful to check whether the cost of the product has been adjusted in the accounts.

I hope this helps.

Best regards,

Andrés

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Sumit Singh 11,757 Super User 2026 Season 1 on at

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Hi,

As per my understanding, this seems to be correct. The negative value entry you’re seeing is the normal cost‑adjustment that pushes the final inbound cost (€110) to the outbound sale that used the item when it was still at €100 expected cost.

What happened (timeline)
1) 9/15 – Purchase receipt (not invoiced):
BC records expected cost = €100 on the receipt. (This can also be posted to interim G/L if Expected Cost Posting to G/L is enabled.)
2) 9/15 – Sales shipment (same day):
The sale uses the cost known at that moment, i.e., €100 expected cost. For sales value entries, cost amounts are negative by convention (credit inventory / debit COGS).
3) 10/01 – Purchase invoice posted at €110:
Now inbound actual cost is €10 higher than the expected cost used by the shipment. When you run Adjust Cost – Item Entries, BC forwards the €10 difference to the related outbound entry by creating an Adjustment value entry on the sale. Because sales cost is shown with a negative sign, an increase of cost appears as a –€10 adjustment on the sales value entry. This is the “negative amount” you’re observing.
About the posting date of the adjustment

By design, the adjustment value entry takes the posting date of the original entry it adjusts (here, the 9/15 sale).

If that date is outside allowed posting ranges or a closed inventory period, BC shifts the adjustment to the first allowed/open date (e.g., 10/01) when you run Adjust Cost.

In other words, your VAT requirement to post the purchase invoice in October is fine—the VAT stays with the purchase invoice in October, while the cost adjustment will backdate to 9/15 if allowed, or land on 10/01 if September is closed.
What you can tell your customer

We shipped using the best available cost on 9/15 (€100). When the final supplier invoice arrived on 10/01 at €110, BC automatically adjusted COGS by €10 to reflect the true cost of the item we had already sold. Because sales costs are stored as negative amounts, that increase appears as –€10 on the sales value entry. This is standard, correct accounting behavior in Business Central.

Good‑practice checks (so numbers flow cleanly)

Run Adjust Cost – Item Entries before Post Inventory Cost to G/L, or enable Automatic Cost Posting to keep G/L aligned.

In Inventory Setup, consider Automatic Cost Adjustment = Daily/Always and Expected Cost Posting to G/L if you want interim postings for uninvoiced receipts/shipments.

Manage Allow Posting From/To (and Inventory Periods) so adjustments land on the intended date if back‑posting isn’t allowed.

References
[1] Design Details - Expected Cost Posting - Business Central
[2] Posting date on value entries - Business Central | Microsoft Learn
[3] Manually adjust the costs of items - Business Central
[4] Reconcile inventory costs with the general ledger

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Gerardo Rentería Ga... 25,555 Most Valuable Professional on at

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Hi, good day
I hope this can help you, and give you some hints.

Average costing Deep Dive in Business Central – Peik's Corner

Design details - average cost - Business Central | Microsoft Learn

Best Regards
Gerardo

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Rishabh Kanaskar 6,219 Super User 2026 Season 1 on at

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Yes, what you’re seeing is expected behavior in Business Central.

Here’s how you can explain this to your customer in simple terms:

Explanation:

> Purchase Receipt (Sept 15)

Item is received at expected cost = 100 €.

BC posts an expected cost entry for the receipt.

>Sales Shipment (Sept 15)

The item is shipped on the same day.

Because the invoice isn’t posted yet, BC uses the expected cost (100 €) to post the COGS.

> Purchase Invoice (Oct 1)

Invoice comes later with actual cost = 110 €.

Item Cost Adjustment batch job runs and adjusts historical cost (backdates cost adjustment).

>Inventory Valuation as of Sept 30

Shows -10 € because BC recognizes that, as of Sept 30, your sold item actually cost 110 € (but only 100 € was recognized before).

The negative value represents the cost adjustment that is pending to be posted in G/L (or has been posted as a backdated cost).

Key Point to Communicate:

This is correct because average costing adjusts costs retrospectively.
The -10 € is not an “error” but the system showing that the actual cost of the sold item was higher than the expected cost you used at shipment date.

Recommendation:

> Run Adjust Cost - Item Entries regularly (daily or before closing the month)
> Post Cost to G/L before finalizing financial reports
> Communicate to the customer that this ensures COGS is accurate even if invoices arrive later.

Thanks

Rishabh

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