Average Cost vs Actual Cost Inventory Accounting

Choosing Your Inventory Accounting Method

When setting up your location settings for RepairQ, you can choose which inventory accounting method you would like to use. Inventory Item cost is set when you add the inventory item via purchase order, manual restock, or import.

Note: You can also manually edit inventory items to change the cost.

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Finding the Inventory Accounting Method in Location Settings

1. Using the Navigation Bar, go to Settings -> Company Settings.

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2. On the Settings Overview page, click the Account dropdown on the left column of settings. From the dropdown options, click Locations.

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3. On the Locations overview page, you can click +Add Location to create a new location. You can also click the Edit Button under the Actions column to manage the Inventory Accounting Method of an existing location.

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3. Below the tax settings for your location, click the Inventory Accounting Method dropdown to make your selection.

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Inventory Item cost is set when you add the inventory item via purchase order, manual restock, or import. You can also manually edit inventory items to change the cost.

 

Understanding the Difference Between Average Cost vs Actual Cost 

Actual Cost will use items from your inventory on a first-in, first-out basis. These items will be used, and the cost associated with them will be the cost that was set when the item was added to the inventory.

Average Cost affects all inventory items that are not in a terminal status Sold, Void, Damaged, Parts only. Each time you add inventory items for a catalog item, it recalculates the average cost for all of the associated items.

Example: If you have 5 Flex Cables in stock with an average cost of $10, and you stock 5 more Flex Cables with a cost of $5, then the average cost for all 10 items becomes $7.50.

When an item moves into a terminal status Sold, Void, Damaged, Parts only then the average cost saved for that item is set and does not change as you add/edit inventory items. Additionally, the cost for that item does not contribute towards the average cost calculation it is treated as historical data from that point forward.

 

 

START 1.18.X

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