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hraissi
December 21, 2018
Solved

Cost of Goods Sold

  • December 21, 2018
  • 3 replies
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The Average Cost of our items are not calculated correctly! How can it be corrected?

 

Thanks

Best answer by MariaAlmaT

Hello there, @hraissi.

 

Welcome to the Community family. I can help you check why the Average Cost of your items are not calculating correctly.

 

Your Average Cost of the items is affected by the cost of goods in the inventory and the total number of items available for sale. The cost of each item in an inventory is calculated on the basis of the average cost of all similar goods in the inventory.

 

To drill down the cause of your weighted cost miscalculation, your best course of action is to run the Inventory Valuation Summary report. This will provide the quantity and average cost for each item to support the balance on the financial statements once an adjustments have been made.

 

Here's how:

  1. Go to Reports at the top menu bar.
  2. Hover your mouse to Inventory.
  3. Select Inventory Valuation Summary.
  4. Set the dates to all.
  5. Double click the item in question to show Inventory Valuation Detail report. It will populates how QuickBooks derived the item's average cost.

The average cost column is based on the purchases, sales and adjustments made to an item. If the detail does not match the financial statements, the reason is usually the result of one of the following:

  • A transaction was coded directly to the inventory balance on the general ledger, rather than following proper procedures through the enter bills, write checks, create cash sales receipt, create invoice, or inventory valuation process.
  • An inventory item that still has a value but has been marked as inactive.

Typically, discrepancies are the result of a journal entry, or a purchase on a bill or check coded to inventory on the Expense tab, rather than through purchasing an item on the Items tab. Thus, creating a negative inventory 

 

You can use an inventory adjustment to increase or decrease the quantity on hand for a tracked inventory item, or revalue the item. I recommend you consult with your accountant or bookkeeper before making any inventory adjustments.

 

The following article contains more insights in understanding COGS tracking: https://quickbooks.intuit.com/community/Inventory-and-projects/Understand-Inventory-Assets-and-COGS-tracking/m-p/203394.

 

This should provide information about your inventory concern. Let me know how things go after following the above steps.. I'll be on the lookout for your reply and to further assisting you if you have other questions. Wishing you and your business continued success. 

3 replies

A
Anonymous
December 21, 2018

This is a common post but it always turns out that QB is right.  The average cost code is very old and stable and always works to my knowledge.

 

The average is always the average cost of the remaining items you have on hand based on your purchases and sales over time, in the order of the purchase and sale transactions by date and order of entry.

H
hraissiAuthor
December 21, 2018

That's what I thought. But it doesn't work like this at all time. For example, we purchased 2 of an item at $120/ea (as a prototype). 4 months later we ordered and received 400 of the same item at $55/each. But the Avg Cost still shows at $120! Not right.

HoneyLynn_G
HoneyLynn_G
February 8, 2019

Good day, @BlissinCT.

 

Thank you for choosing QuickBooks as your accounting partner. I'd be pleased to introduce to you our Advanced Pricing feature.

 

The Price Rules is available in the Enterprise versions. QuickBooks automatically changes the prices of items on sales forms according to rules you set for a customer, item, sales rep, date range, and class.

 

Here's how to turn it on: 

  1. Click Edit.
  2. Choose Preferences.
  3. Go to the Sales & Customers menu.
  4. Choose the Company Preferences tab.
  5. In the Custom Pricing section, select Enable Advanced Pricing.
  6. Select OK.

Here's how to create a price rule:

  1. Click Lists.
  2. Choose Price Rule List.
  3. Right-click on your mouse and choose New.
  4. Enter the necessary information.
  5. Click OK.

For in-depth information, please check the Advanced Pricing article.

 

That's it. Let me know if you have other questions for me. I'm willing to help you more about inventory. Wishing you all the best!

B
BlissinCT
February 8, 2019

I'm really just learning about accounting and need to know that if I buy 5 of item A at $10 one day and then 20 of item A at $20 the next month, how do I account for that in my inventory parts list. 

RenjolynC
RenjolynC
February 8, 2019

Hi there, BlissinCT.

 

The average cost is automatically updated in QuickBooks. When you create a bill, use the same inventory item and update the cost. This will prompt you to update the item record with the new cost.

 

When you run the Inventory Valuation Summary, you'll be able to see the adjusted average cost.

 

Feel free to reach out to us if you have any other questions about QuickBooks. Thanks.

M
marykay60
June 18, 2020

I am trying to add material cost to an invoice in MAC QB desktop 2020 but the drop down only lets me charge for  labor.  What am I doing wrong?  In the old version of QB I was able to choose from the drop down and add material as I purchased it..

DivinaMercy_N
DivinaMercy_N
June 18, 2020

Hi there, @marykay60.

 

When you create inventory items and choose Inventory part as the type for the reason that you're going to resell these items. QuickBooks will automatically create a Cost of Goods Sold account to track the cost for the items you are selling. Cost of Goods Sold (COGs) is one of the default accounts used by QuickBooks this will be automatically generated in a transaction when using an inventory item. 

 

For more understanding about the inventory assets and cost of goods sold tracking in QuickBooks, you may refer to this article link: Track inventory. 

 

Don't hesitate to post a reply below if you have further QuickBooks concerns. I'm always here to help you. Stay safe and take care always. 

M
marykay60
June 18, 2020

so you're saying cost of goods can't be an option in the drop down menu of an invoice..seem's ridiculous you have to create an inventory item in order to bill someone for something you picked up and just want to show it as material without inventorying the items..so, can you explain the process of creating an inventory item and being able to bring it into an invoice..

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