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kim-z
February 11, 2019
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How FIFO work when received item multiple time in a single day?

  • February 11, 2019
  • 3 replies
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Hi,

I'm trying to understand how FIFO works in QB.

I ran into a following scenario and I hope someone could help me understand it.

 

I create an inventory with starting value of Qty = 10 and Cost = 5.

Then I create a bill on the same date with Qty = 10 and Cost = 6.

and I create an invoice with Qty = 15.

I ran an "Inventory Valuation Detail" report and it look something like this.

It look correct to me.

Transaction TypeQtyRateFIFO Cost
Inventory Starting Value10550
Bill #110660
Invoice #1-105-50
Invoice #1-56-30

 

But as I go back to Bill #1 and change the Qty from 10 to 20.

I ran the "Inventory Valuation Detail" report  again and it look something like this.

It doesn't look correct to me.

Transaction TypeQtyRateFIFO Cost
Inventory Starting Value10550
Bill #1206120
Invoice #1-156-90

 

As you can see the Invoice #1 now use all item with Rate = 6.

I expected to see it use 10 Qty with Rate = 5 and another 5 Qty with Rate = 6.

Can someone help me understand how FIFO work in this scenario?

 

Best answer by Catherine_B

Hi there, kim-z. 

 

QuickBooks would first base on when the item was purchased. Since you recorded a bill and the items on the same date, QuickBooks will get the most items available. In your case, QuickBooks can accommodate Qty= 15 on the Rate=6. 

 

Here's an article that will guide you what FIFO is and how is it used for inventory cost accounting. 

 

Get back to me if you have further concerns. 

3 replies

C
Catherine_BAnswer
February 11, 2019

Hi there, kim-z. 

 

QuickBooks would first base on when the item was purchased. Since you recorded a bill and the items on the same date, QuickBooks will get the most items available. In your case, QuickBooks can accommodate Qty= 15 on the Rate=6. 

 

Here's an article that will guide you what FIFO is and how is it used for inventory cost accounting. 

 

Get back to me if you have further concerns. 

M
Malcolm Ziman
February 11, 2019
@Catherine_B wrote:

 

Since you recorded a bill and the items on the same date, QuickBooks will get the most items available. In your case, QuickBooks can accommodate Qty= 15 on the Rate=6. 

 

You should really read the question. Asker got a different result to what you say the first time, then got what you describe when the bill was edited. 

 

And your statement "QuickBooks will get the most items available" does not make any sense, and in any case is not what happened

M
Malcolm Ziman
February 11, 2019
@kim-z wrote:

 

 

But as I go back to Bill #1 and change the Qty from 10 to 20.

I ran the "Inventory Valuation Detail" report  again and it look something like this.

It doesn't look correct to me.

Transaction Type Qty Rate FIFO Cost
Inventory Starting Value 10 5 50
Bill #1 20 6 120
Invoice #1 -15 6 -90

 

As you can see the Invoice #1 now use all item with Rate = 6.

I expected to see it use 10 Qty with Rate = 5 and another 5 Qty with Rate = 6.

Can someone help me understand how FIFO work in this scenario?

 

I replicated your scenario in the sample co, and even after I changed the Bill to 20 I still got 5 x$6 and 10 x $5 for the COGS of the invoice. i.e there was no change.

 

They say to clear cache for strange behavior.

 

I would assume it looks at the time of the transaction if 2 are on the same date.  Maybe it looks at the modified time, instead of the create time, but in my test, I see it did not

 

 

    K
    kim-zAuthor
    February 12, 2019
    @Malcolm Ziman wrote:
    @kim-z wrote:

     

     

    But as I go back to Bill #1 and change the Qty from 10 to 20.

    I ran the "Inventory Valuation Detail" report  again and it look something like this.

    It doesn't look correct to me.

    Transaction TypeQtyRateFIFO Cost
    Inventory Starting Value10550
    Bill #1206120
    Invoice #1-156-90

     

    As you can see the Invoice #1 now use all item with Rate = 6.

    I expected to see it use 10 Qty with Rate = 5 and another 5 Qty with Rate = 6.

    Can someone help me understand how FIFO work in this scenario?

     

    I replicated your scenario in the sample co, and even after I changed the Bill to 20 I still got 5 x$6 and 10 x $5 for the COGS of the invoice. i.e there was no change.

     

    They say to clear cache for strange behavior.

     

    I would assume it looks at the time of the transaction if 2 are on the same date.  Maybe it looks at the modified time, instead of the create time, but in my test, I see it did not

     

     

    Thanks Malcolm but I tested myself and get the result as per Catherine suggested.

    So, It base on the purchase date first and if the purchase date is the same it base on the most items available and if it has the same number of item then i guess it base on created date (as per my experiment). 

     

    C
    Catherine_B
    February 12, 2019

    Thanks for getting back, kim-z. 

     

    QB works base on the current transaction created. That is why COGS would change every time you make a transaction. However, you can manually calculate the changes from the first to the recent transaction. 

     

    Here's how:

    1. Click the Gear icon and under the Tools section, choose Audit Log.
    2. To easily locate for the invoice transaction you can filter the report. 
    3. Choose the Date (From and To) then select these options: 
      •    Events:  Show only these events
      •    Select Transactions
      •    Show: All Transactions
    4. Then click Apply. 
    5. Under the HISTORY column, click the View link. 
    6. From there you can look into the changes of the Qty and Rate. 

     I recommend submitting feedback about the COGS function.

     

    The Community is around to help you if you have additional questions. 

    vpcontroller
    vpcontroller
    February 12, 2019

    Malcolm's assessment is accurate on this one, I think.

     

    Your original question is how FIFO work when received item multiple time in a single day?

     

    If three transaction types (inventory starting value, Bill and Invoice) happen on the same posting date, FIFO qty/cost should first come out from inventory starting value transaction because that was the first entry with "As of date" in QBO. You can't enter Bill (or Invoice) before 'As of date' in QBO.


    That's how normally FIFO inventory system should work. Since it's not working that way in QBO, it's a BUG in the system. Someone needs to report this to the Product Development Team and tell them to fix it. See screenshot #1 below.

     

    As a workaround for now, If you change the "As of date" a day early for inventory starting value transaction, it should work fine as in your 1st example. See screenshot #2 below.

     

      M
      Malcolm Ziman
      February 12, 2019

      Yes, there does seem to be a bug. When I did my test yesterday I entered an earlier "As of date" for the inventory starting value. If I enter the same day for all the transactions, the calculation is questionable.  It should look at the TIME of the transaction, really, which it is not doing

        M
        Malcolm Ziman
        February 13, 2019
        @Malcolm Ziman wrote:

        It should look at the TIME of the transaction, really, which it is not doing

        I realize now that the time of the transaction is not known.  All that is known is what time it was created (or modified), which is not really a determining factor. You may buy some items at 10am and more at 11am, but record the 2 transaction in the books in reverse order.

        But still create time is better than using "the largest purchase" in a day, which is meaningless

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