Parts Inventory Reconciliation (not using WIP)
To reconcile inventory, there are a few variables that need to be considered when looking at your physical valuation when comparing it to the GL account balance.
First, the costing method being used to value inventory will be either replacement cost or FIFO cost.
For replacement cost companies-- **Journal entries should be completed each time you re-price inventory from a price file to account for cost increases in the GL Account. See KB regarding those considerations.
For FIFO cost companies-- Ensure you run the Correct FIFO function to ensure a valid cost is associated with every part number in your inventory before reconciling inventory.
The first component to reconciling your inventory account begins with your GL. You will want to use the running balance of your parts inventory account to compare to the shelf value.
This is the value you will compare your physical valuation with.
To do so, you will first run an inventory valuation for all inventory to see what the value is of parts that you have available in your inventory.
Run the Parts Inventory Valuation Detail (recently updated to include FIFO or Replacement Cost based on warehouse settings).
Then, because parts are taken out of inventory when they are added to a work order but are not relieved from the GL account until the work order is invoiced, you must consider all parts that are committed to open orders that have not been invoiced as of yet. The Work in Progress - Parts report will show you this value. You will want to use the cost value from the report and not the price value, and each department total will need to be considered.
Totals from report by department - 5006.90 + 912.75 + 4537.82 = 10457.47
The final consideration, then, is parts that have been received into inventory and are considered in the valuation that have not yet been posted through AP invoice entry to post to the GL account.
To find parts that have been impacted by this scenario, you can run the Parts Received by Date Range and cross reference those parts to your AP invoices to determine which parts have been received that are not yet posted into the GL. At this time this is a manual process, so we do recommend keying in all AP invoices before reconciling the Parts that have posted to inventory but not yet to the GL to minimize the impact and work required on this report.
Then, you can compare the values from your reporting:
Inventory Account GL = 145,254.73
Inventory Valuation = 133698.35
+ Parts in Process = 10457.47
- Parts Received not posted = -10.00
---------------------------------------------------
144,145.82
My variance here is 1108.91, with my GL account value being higher than my physical value. This can occur due to shrinkage, lost or missing inventory, miskeyed invoices or credits, etc. and it is normal for businesses to see a small variance in the book to physical values each year.
This can be monitored over time and/or a journal entry can be made to the inventory GL to balance the account to the physical value that is recorded.
Related Articles
Physical Inventory
Before starting the Physical Inventory Count process in Softbase, you will first want to run a report to capture the inventory counts and values. To do that in Softbase, on the Reports tab, run the following Report: Parts Inventory Valuation ...Account Reconciliation
Account Reconciliation The Account Reconciliation is a new feature available on the Accounting Tab to help users reconcile a specific GL Account. The option is available if the Account Reconciliation Security is set on the Accounting Tab in the ...Phase In/Out in Inventory Management
Overview In inventory management, the phase in/out process refers to the transition of a new part from initial setup to becoming readily available for stock orders. Understanding the phase in/out status of inventory parts is crucial for maintaining ...Re-price Functionality in Inventory Management
Overview In inventory management systems, the "Re-price" functionality allows users to update the cost and list prices of parts based on the information provided in OEM price lists from vendors. It streamlines the process of adjusting prices in ...How to set up core parts to post to a different account.
Our recommendation would be to set up a new parts group for your core part numbers in the parts setup tab under Groups. When setting up that parts group, you can then denote an inventory account for that group, which would be your Cores inventory ...