Cost Adjustment of on hand inventory without closing

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Posted on by Dhruv.Singhvi

Hi,

I wanted to know is there any process where I can adjust the on-hand inventory of items without going through closing inventory process. My costing method is weighted average of inventory by date.

Scenario : I purchased 1 million units of iPhone 11 at various times in last 6 months. My inventory on hand is 40K units @ $900 per unit on weighted average. I distribute these to retailers at $947.37 earning a margin 5%

Making a Apple announces that they are launching a new model of iPhone, so the iPhone 11 will now be sold at $800 retail price. Apple agrees to support me for the price drop on Iphone 11.

So as to not have Sales order with negative margins, when I sell these to retailers at $800, I want to adjust the cost price to $760 and if possible park the difference to a GL account. How can I achieve this without closing the inventory ?

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André Arnaud de Cal... 305,178 Super User 2026 Season 1 on at

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Hi Dhruv,

Do you really want to hide your business risk? Selling electronics comes with unexpected changes that might influence the demand from the market. If you would lower the cost price of your on-hand inventory. there is a loss posted somewhere.

To answer your question: Using the weighted average, you first have to do a closing to be able to adjust the on-hand.

If you are using the standard cost or moving average principle, you can change the value at any given time. These costing principles work without the closing procedure.

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Dhruv.Singhvi 30 on at

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Thanks Andre for your reply.

Do you really want to hide your business risk? Selling electronics comes with unexpected changes that might influence the demand from the market. If you would lower the cost price of your on-hand inventory. there is a loss posted somewhere.

-The loss will be compensated by the Principal/Vendor. The loss will be claimable from vendor. So Inventory A/C CR and Claim from Vendor DR. (In my example Apple will support for loss.. Just imagine if apple does not make up for loss of distributor, why will anyone distribute their products... This is how the distribution business works in Middle East and Africa.)

In distribution we cannot have standard cost. My client wants to use weighted average only. They don't want to use moving average. Is their any other way ? Should this be customized ? Is this customizable ?

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Guy Terry 28,987 Moderator on at

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I think you will have to perform a closing, since the adjustment is done at the point of a previous closing. But, as you are using an actual costing method (and as is common with most of the actual costing methods in F&O), you should be running inventory close regularly anyway. It will become mandatory from 10.0.10 (I think), regardless of the costing method.

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André Arnaud de Cal... 305,178 Super User 2026 Season 1 on at

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Hi Dhruv,

Thanks for the explanation. So, in fact the loss will be compensated which influences the cost price afterwards. I understand it now.

There might be some workarounds here:

- Create an inventory closing the moment you need to change the cost price; however this could lead to other issues as you can't post new inventory transactions on a date before the last closing.

- Use an Inventory movement journal where you can set an own offset account. Then create a negative line for the current on-hand and a new line with a positive quantity and the desired cost price. Make sure the inventory deduction will be marked against the transaction from the original purchase order(s).

- Create a return PO and a new PO with a lower price. In that case, you can also match the incoming credit invoice from the vendor.

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Dhruv.Singhvi 30 on at

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Hi,

Use an Inventory movement journal where you can set an own offset account. Then create a negative line for the current on-hand and a new line with a positive quantity and the desired cost price. Make sure the inventory deduction will be marked against the transaction from the original purchase order(s)...... This solutions works

But the inventory ageing will change :( Anything that will keep Ageing intact

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