By: John Ellis – Business Central Consultant

A recent inquiry was brought to our attention around duplicate cost of goods sold and inventory account postings for the same amount in Dynamics 365 Business Central.

Please follow the instructions below to guide you through resolving this issue.

BACKGROUND:  In a test company a sales invoice was posted. The image below shows the resulting General Ledger Entries.

5000 is Cost of Goods Sold, while 1200 is Inventory.  FIFO is the inventory valuation method.

It would appear that posting both increased and decreased Cost of Goods Sold and Inventory and for the same amount, as if the transaction shows a “wash” for these two accounts.

Why?

RESOLUTION:  Through review of the Item Ledger Entries, we determined that the reversal of cost was due to an Item Journal Entry posted with the Purchase Entry Type for 100 units mistakenly with a $0.00 Unit Cost.  The Preview Posting showed a default Cost of Goods Sold based on the Item Unit Cost, when the Sales Order line was entered.  But, with the Automatic Cost Adjustment setting of Always in Inventory Setup, the processing immediately adjusted the cost to zero.

To correct the wrongly posted $0.00 value, we utilized the Item Revaluation Journal and set the “Applies to Entry No.” to revalue the inventory valuation layer for the full 100 PCS at $85.00 per 100 units. This adjusted the cost of the sold inventory to an $85.00 per unit cost and eliminated the issue caused when the per unit cost was originally and mistakenly entered for $0.00 instead of $85.00. 

This shows the entries to Cost of Goods Sold and Inventory for the Item Revaluation:

The General Ledger Entries in the following screenshot show how the correct Unit Cost of $85.00 is being retroactively updated — in all previously posted and affected sales invoices.  In other words, the inventory valuation cost is being corrected automatically:

The following Posting Preview window shows that Cost of Goods Sold and Inventory accounts are being hit twice, however, the amounts are different.  So, Item Revaluation corrected the inventory valuation layer and ensured that posting to Cost of Goods Sold and Inventory does not result in a “wash”.

For any further inquiries, please contact us at support@bondconsultingservices.com