Reasons why the Inventory GL Account may not equal the Stock Status
|In theory, the GL Inventory control accounts should not
differ from the Stock Status Summary. However, there are a number of reasons
why discrepancies may arise.|
- Scope: It is assumed that for the purposes of this discussion
that we are not talking about discrepancies between the “real life”
physical inventory in your warehouse and what is recorded in your BV
inventory module. This is an entirely different issue, and is at the
root of most inventory problems and discrepancies.
- Sell, receive, count the wrong inventory item in Sale
Order, Purchase Order, Adjust Inventory, and Physical Inventory
- Current vs Average Cost on Stock Status report: Be sure
to print the Stock Status Summary report on the basis of Average
Cost, NOT Current Cost. All postings to the GL are made using
Average Cost. Unless of course you are using FIFO.
- Control: Technically, the Inventory GL Accounts are not “pure”
control accounts, in that one can post directly to them at any time,
outside of functions that affect Inventory. For example, you can
post to them directly from Accounts Payable.
This is different than the AR and AP control accounts, which cannot
be directly posted to (except when you “unintegrate” the system).
If you want the Inventory GL accounts to function as control
accounts, then no entries should be made to them outside of the
normal functioning of Purchase Order, Receipts, Warehouse Transfers,
Sales Order, and Physical Inventory.
- On Hand Qty: The ability to directly modify the On Hand qty of
all inventory items must be turned off. If one has migrated from an
earlier version of BV, this may not be the case. There are two ways
to turn this off, one more complete than the other.
- Full Integration: The System Setup switch, “Post Inventory
Adjustments to GL” must be turned on. If it is off, then all
Receipts made through the “truck icon” will not be posted to the GL,
and neither will Physical Inventory adjustments.
- Variance Account: When considering the value of Inventory in the
GL, do not count the Inventory Variance account, as this represents
the “other half” of GL entries that adjust the Inventory GL
accounts. It is customary to reallocate Inventory Variance to some
other Account, such as COGS, or spoilage/breakage etc. at the end of
the year. This account will normally fluctuate up and down in value.
If it trends one way or another, then this indicates that something
is wrong, usually with how people are using BV.
- Reports in Average vs Current Cost: Inventory value reports must
be printed using Average Cost.
- Dates: When comparing the Stock Status Summary to the Inventory
GL Accounts, it is important to compare the same dates. Keep in mind
that the balances you see in the GL are
always month-to-date balances. For example, the displayed balance of
a GL account will always include all transactions for that entire month. So
once you reached, for example, the 23rd of August, you will not be
able to view the balance at, say, the 15th. (However, the GL Activity Report
can show this.) But when viewing the GL Account on screen, or on a
printed Trial Balance and Balance Sheet – these will always be
And forward-dated transactions can muddy the waters as well.
- Multicurrency: Although Inventory is always carried in
Base Currency, and entries are always made into it by the system,
sometimes entries can find their way into a USD (or other currency)
Inventory GL account for various reasons.
- Autopost: AutoPost should be turned on. If it is off, and users
are able to edit journal entries, then entries to the Inventory GL
Accounts can be changed during posting.
- Negatives: In past versions of BV occasionally there were issues
when Average Cost and/or quantities went into negatives. These
issues were supposed to have been fixed in v7.1.
However, negatives can be an issue for any Costing system, in
particular Average Costing. There is more than one approach to
The approach that BV uses is oriented towards ensuring that the GL
Inventory accounts are corrected once the inventory item returns to
a positive quantity status and one or more items are then sold from
that positive quantity.
- Close POs to AP: The System Setup switch “Close POs to AP” must
be turned on, otherwise proper reconciliation of Vendor Invoices to
POs is not necessarily taking place.
- Receiving non-stocked items on a PO when the Vendor’s default
expense GL account is set to Inventory will create a discrepancy, as
non-stocked items are not counted in the inventory module and thus
not in the Stock Status reports.
- Vendor Default GL Acct: No Vendor should have an Inventory account as their default
expense GL Account to ensure that no postings to Inventory GL
Accounts occur outside of Purchase Order, Receipts, Warehouse
Transfers, Sales Order, and Physical Inventory.
- Restore: If a partial restore of BV data files was improperly
performed a discrepancy may occur.
- When assembling a BOM you can override the cost of the assembled
item. BUT this cost differential will NOT be posted to the GL, even
though it affects the cost of the finished goods.
- Sale of Non-stocked items: These will post as a CR to the Inventory GL
Acct per Sales Dept 000, which is actually the GL Acct per Special
Accounts. Non-Stocked items are by definition not in Inventory,
therefore this could create a discrepancy in Inventory value between
the GL and Inventory module.
- The opening balance is incorrect: The balance of GL
accounts are all calculated starting with a hidden number for
"Opening Balance Last Year". All balances for Last year, This Year,
and Next Year periods are calculated based on that. If that Opening
Balance number is incorrect, then the remainder of the balances will
- Unposted or partially posted GL entries: If the posting
of a GL entry was interrupted by network problems, then the portion
relating to the Inventory GL account may not have updated the
balance of that account. Run the special Reorganize function to
repost all GL journal entries.
- Network: Yes, there is always the usual "it’s the network"
reason for discrepancies. Although this cause can be overused, this
is nevertheless a very real cause of problems in any system. The
"network" includes the workstations, cabling and hubs, and server.
Many factors come into play here to potentially cause problems.
The symptom in this case would be failure to update the Inventory
quantities on hand during posting.
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