A recent inquiry involved duplicate Cost of Goods Sold (COGS) and Inventory postings for the same amount in Dynamics 365 Business Central. This article walks through the root cause of the issue and how to correct inventory valuation using the Item Revaluation Journal.
Background: Duplicate Inventory and COGS Postings
In a test company, a sales invoice was posted, resulting in the following General Ledger behavior:
- 5000 — Cost of Goods Sold
- 1200 — Inventory
- Inventory valuation method: FIFO
Both COGS and Inventory appeared to be increased and decreased by the same amount, effectively creating a “wash” transaction.
Why does this happen?
Root Cause Analysis
Upon reviewing the Item Ledger Entries, the issue was traced to an Item Journal Entry that was posted with:
- Purchase Entry Type
- 100 units
- Unit Cost = $0.00 (entered in error)
Although the Preview Posting initially showed COGS based on the item’s unit cost, the Automatic Cost Adjustment setting (set to Always in Inventory Setup) immediately adjusted the cost to zero after posting.
Resolution: Correcting Inventory Valuation with Item Revaluation
To correct the incorrect $0.00 valuation:
- Open the Item Revaluation Journal
- Set Applies-to Entry No. to the affected inventory valuation layer
- Revalue 100 PCS at $85.00 per unit
This action:
- Corrects the inventory valuation layer
- Updates COGS to the correct unit cost
- Retroactively fixes all affected posted sales invoices
The resulting General Ledger Entries correctly reflect updated postings to Inventory and Cost of Goods Sold, without producing a wash.
Why This Matters in Business Central Implementations
Inventory valuation and cost adjustment behavior are typically reviewed during a Business Central implementation
to ensure posting logic aligns with accounting requirements. Incorrect unit costs or misconfigured cost adjustment settings can silently create reporting discrepancies if not addressed early.
Need Help Correcting Inventory or Costing Issues?
If you need assistance reviewing inventory valuation, cost adjustment settings, or posting behavior in Dynamics 365 Business Central, our team can help as part of an implementation, reimplementation, or optimization project.
