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Inventory Valuation - Purchase Receipts Report

Hi:

I realize that the Purchase Receipts Report is the gold standard of Inventory Valuation.

But, at this one place of business, we are seeing (for FIFO Perpetual) huge "jumps" in Unit Cost from one layer to another and no rhyme or reason as to why.

We are looking at this in a test company and after having tested the change of the Valuation Method for all items from FIFO Standard to FIFO Perpetual.

It seems that a lot of these "jumps" are attributable to quantities of 1.00. Even where a Purchase Receipt may call for a quantity of 25.00, one receipt layer for the receipt on the report is at a quantity of 24.00 at the "normal" Unit Cost" but a much larger Unit Cost at a quantity of 1.00 on the report.

The item's Base Unit of Measure is LB, while the receipt Unit of Measure is typically KG (at 2.21 times the 1.00 base quantity).

Could these extra layers at a quantity of 1.00 be attributable to some sort of rounding?

Thanks!

John

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Distribution

I would not consider the Purchase Receipts Report the gold standard for inventory valuation. (I am a big fan of the Historical Inventory Trial Balance. )

I agree that you are likely seeing a rounding issue that you are seeing. (A similar rounding happens when you purchase in amounts out more decimal places than the currency.)

Run the calculations on a calculator and you'll quickly see what has happened: GP has to post the true dollar amount to payables/general ledger and just can't do it with also keeping inventory in balance. That creates the lone item at a crazy cost.

GP Support may have an official list of options for this. (The most common one I see for perpetual methods is to use the Adjust Costs window to "fix" that layer, knowing you are going to send an adjustment to the GL. When Receiving/Invoice Match person is comfortable with math, inventory valuation, and general ledger accounting, I sometimes see them do the math in the line items to receive the cost at an amount that doesn't cause a rounding problem, and then put a non-material difference in one of the footer amounts so the full amount goes to AP but there is a little bit of the receiving that is expensed, not inventoried, at the time of receiving.)

Note: In the days before HITB, I rarely recommended Adjust Costs window. I have become more accepting of it now that I can "see" more in HITB.

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