Featured Post

Dynamics GP 2016 R2 is Now Available .. and #MSDynGP will Always be Avilable

The Microsoft Dynamics GP team announced today that Microsoft Dynamics GP 2016 R2 has released . Dynamics GP 2016 R2 continues the grea...

Monday, August 26, 2013

Inventory Valuation Methods



In Great Plains, the cost posted to General Ledger differs among different inventory valuations methods. GP supports the following Valuation Methods:

 FIFO valuation method or LIFO Perpetual valuation method
" The Actual Cost is posted to the General Ledger when the item is received in Inventory. The Actual Cost is posted to the General Ledger when the item is sold, decreased, or transferred."

FIFO valuation method or LIFO Periodic valuation method

" The Actual Cost is posted to the General Ledger when the item is received in Inventory. The Standard Cost is posted to the General Ledger when the item is sold, decreased, or transferred."

Average perpetual valuation method

" The Actual Cost is posted to the General Ledger when the item is received in Inventory. The Average Cost is posted to the General Ledger when the item is sold, decreased, or transferred."


Inventory value differs according to the adopted valuation method, as shown below;

  • FIFO or LIFO Perpetual Valuation | On Hand Quantity is Multiplied By the Cost at which Item Was Received.
  • Average Perpetual Valuation | On Hand Quantity is Multiplied By The Current Cost of the Item

  • FIFO or LIFO Periodic | Valuation On Hand Quantity is Multiplied By The Standard Cost of the Item.
I will shed a light on the cost calculation criteria in Dynamics GP when the valuation method is FIFO Perpetual through the following Case Study



Item Number
Date Received
Quantity
Quantity Sold
Unit Cost
Extended Cost
100XLG
09/04/2011
9
0
70
630
100XLG
10/04/2011
10
0
72
720
Grand Total

19
0
142
1350




Points to Consider: 
- When selling 12 units of (100XLG) on price $ 95
- Items received first are sold first
- The following transactions are recorded on GP 


Sales

Debit
Credit
Accounts Receivable / Cash
1140

Sales

1140

Cost (COGS)

Debit
Credit
COGS
(9*70) + (3*72)

Inventory

(9*70) + (3*72)

 

Dynamics GP Help Note !


  • Item Purchase Receipts Report Helps in determining the Cost & Quantities Available for Each Receipt
  • Item Purchase Receipts Report and Stock Status Report are always the same (same inventory source)
 
Valuation Methods Pros and Cons


Valuation Method
Pro’s
Con’s
FIFO Perpetual
And
LIFO Perpetual
- Easy Management & Easy for  Inventory and GL Reconciliation

- Purchase Receipt and Stock Status always Shows the Cost which appears in GL
- Cost Of Sales will be determine by first/last layer of receiving

- This needs  to look into purchase receipt  detail
Average Perpetual
One Cost For All sales which appears in Item Card




- Back dated posting will affect
already Posted Receipts
Already posted Sales.
Which creates Variances continuously

FIFO Periodic
And
LIFO Periodic
- Helps If company wish to have standard costing for period of time
It requires periodic Cost revaluation which increase inventory management task



  
Best Regards,
Mahmoud M. AlSaadi