Adjust the IR rate in a subsequent open accounting period
We can adjust the Item Rate of the Item Receipt in another open accounting period.
The variance however will be associated with the Item records and not the Item Receipt transaction.
For instance, an Inventory item was received at $50 but the same was billed for $55. The Item was already received by then and the period was closed.
Using the Inventory worksheet, we can adjust the Item quantity and value to include the variance of $5 in the Item records.
Let’s assume the value of inventory stock was $1460 and the quantity was 25 before the adjustment was made. Using the Inventory worksheet, the value of the item can be rectified to show $1465 including the variance amount whereas the quantity would remain the same.
Before adjustment:
After adjustment:
Considerations to be noted
There are certain considerations to be noted for the second workaround:
- If we use LIFO or FIFO costing, the cost of any item we have adjusted will be averaged, LIFO or FIFO will be ignored, and our costing history will be lost. To preserve LIFO or FIFO, go to Transactions > Adjust Inventory for any inventory adjustments. If we use the average costing method, we can make any changes we want on this worksheet.
- Since we are making the adjustment in a period other than the transaction period, various factors like the currency exchange rate will be affected.
- The variance amount is not directly associated with the Item Receipt transaction. It is associated with the current value of the Item records.
- Since we are adjusting in a subsequent opening period, we are basically making the adjustment to the value of the current stock. Therefore, the variance amount might be charged on a different stock quantity other than that received in the said Item Receipt. For instance, if an item is received on 12 November 2020 after which the period was closed, the adjustment would be made in a subsequent open period, say December 2020. However, the item which was received on 12th November might have been sold in the November period itself. Thereby we are associating the variance amount to the value currently in stock in the open period.
- The inventory adjustment worksheet cannot be applied to Lot numbered, serial-numbered, or inactive items.