Stock Value Reconciliation with General Ledger Value

Stock Reconciliation.

Please reconcile your inventory value in the general ledger account (balance sheet value) with the actual inventory value (book value) shown in the extended stock lookup on a regular basis.

Note that if there is a difference, then it will have a direct influence on your income state.

If there is a discrepancy between the two values, the following journal entries should be made:

 

1) If the stock value is greater than the balance sheet value, post the difference of the value to these accounts:

   Debit Inventory  and Credit Cost of Sales (or as advised by your accountant)

 

2) If the stockt value is less than the balance sheet value, post the difference of the value to these accounts:

   Debit Cost of Sales and Credit Inventory (or as advised by your accountant)

 

To automatically match your general ledger stock account value with your physical stock value, navigate to the Dashboard and click Fix StMaster/GlDetail Value Diff. button.

 

These differences can occur when:

 1) negative stock is allowed (selling items before you do the GRN).

 2) if  the Supplier list  price is used instead of Average Purchase Cost, as your Cost of Sales/Valuation Method on your Main Stock Form.

 3) if there is an average cost value specified for Service Items like labour and the Service Item is used as part of a Bill of Material.

 

Example 1

A bill of materials (BOM) is prepared, which includes labor at an average cost of $100. After you build the item, it will now include the $100, thus your stock value will increase by $100, and no entries will be made in your general ledger.

If you amend this, the General Ledger entries will be: 

Debit the stock account with $100 and credit the cost of sales account with $100.

 

If you sell the BOM item the entries will be:

Credit the Stock Account with $100 and Debit the Cost of Sales account with $100. Your general ledger stock account will now be in line with your stock value.

 

Example 2. You sold an item before a goods received note was generated (using the Average Cost Price as the Cost of Sales value).

For example, because you did not generate a GRN for this item, the stock quantity is zero and the cost of the item is also zero.

After selling the item the stock quantity will show -1.

There will be no entries in the general ledger stock account or the cost of sales account because the average purchase cost of the items was $0.

 

Note:If a GRN had been generated prior to selling the item, the average cost would have been reflected.

 

Stock value (Average Cost * In Stock): $0.00         (0 x -1 = 0)

Stock Value in the General Ledger:      $0.00

Stock Value Difference:                          $0.00

 

If a GRN is generated after the sale - the journal entries will be,

 

Your Stock value will be zero, quantity -1(from the invoice) + 1 (GRN) will equal zero.

 

Stock value (Average Cost * In Stock): $0.00      (100 x 0=0)

Stock Value in the General Ledger:      $100.00

Stock Value Difference:                         -$100.00

Your balance sheet value is now $100, and your physical stock value will be $0; the difference is $100.

 

To bring the general ledger stock amount in line with your stock value, credit your general ledger stock account with $100 and debit your cost of sales account.

 

Example 3. You sold an item before a goods received note was generated (using the Supplier List Price as the Cost of Sales value)

The stock quantity of an item is 0 and the Suppliers' List Price of the item is $80.

The item is then sold, the quantity on hand will reflect -1

The General Ledger entries will be as follows:

 

Stock value (Average Cost * In Stock): $0.00

Stock Value in the General Ledger:     -$80.00

Stock Value Difference                           $80.00

 

Please note:

1) that the correct procedure would have been to do a Goods Received Note before you had sold the item. You can also prevent the selling of negative stock by disallowing it in the Stock > Inventory options form.

2) You can't bring the General Ledger amount in alignment with your stock value at this stage, you must wait for the GRN to be processed before you do it.

 

If a GRN is now done afterwards, and say the real cost of the item is $100 (remember the computer used the Supplier List Price of $80.00).

The General Ledger entries will be as follows:

 

Your Stock value will be zero, quantity -1(from the invoice) + 1 (GRN) will equal 0.

 

Stock value (Average Cost * In Stock): $0.00      (100 x 0=0)

Stock Value in the General Ledger:     -$20.00    (80 - 100 = -20)

Stock Value Difference:                        -$20.00

 

You will now have to bring the general ledger stock amount in alignment with your stock value by debiting your general ledger stock account with $20.00 and crediting your cost of sales account.

To bring the general ledger stock amount in line with your stock value, debit your general ledger stock account with $100 and credi your cost of sales account.

If the supplier list price is equal to the average cost, then you do not have to do anything.