Dynamics GP Cost Valuation Methods
February 11 |
Dynamics GP Cost Valuation Methods
First, you will assign a Valuation Method when you create the Inventory Items. Optional: When you assign the Class ID to the item, the Valuation Method can be defaulted.
Valuation Method
ITEM MAINTENANCE: Displays the valuation method you entered for the selected item in the Item Maintenance window. The valuation method for an item is used to determine how the item will be valued for inventory purposes when it’s sold.
CLASS ID: This can also be defaulted based on the Class ID the item is assigned to.
Specify which valuation method will be used to determine the cost of the items in this class.
It’s important to select the valuation method that’s appropriate to the type of items that will be included in this class. The valuation method will determine the way that costs for the item are posted when you enter sales, which in turn affects the amount of profit that you’ll see on your financial statements. For this reason, most locations have strict legal limits on changing valuation methods.
GP Cost Valuation Methods
Valuation methods
Valuation methods determine how the costs of inventory items are calculated. While you can have different valuation methods for different items or companies, it is recommended that you talk to your tax accountant before changing the valuation method you currently use.
The following list describes the valuation methods available and explains how each is used.
FIFO perpetual
Items purchased first are considered sold first (First In, First Out). Detailed information about the cost of all items is maintained, and the inventory is valued at its actual cost. The current cost for items is the cost of the item the last time it was purchased.
LIFO perpetual
Items purchased last are considered sold first (Last In, First Out). Detailed information about the cost of all items is maintained, and the inventory is valued at its actual cost. The current cost for items is the cost of the item the last time it was received.
For perpetual valuation methods
When you sell an item by using a perpetual valuation method,
the cost value for each quantity that is sold comes from the appropriate
purchase receipts layer in the Inventory module. You can view the purchase
receipts layers in the Purchase Receipts Inquiry window.
To open the Purchase Receipts Inquiry window, point to Inventory on
the Inquiry menu, and then click Receipts.
Moving average perpetual
The cost of items with the same item number is totaled and an average cost is assigned to the items. The average cost of an item is revalued throughout the period as you enter increase transactions for items. The average cost also is used as the current cost. The formula is:
(Current units x current moving average cost) + (New units x purchase price) / (Current units + new units)
For average perpetual valuation methods
When you sell an item by using an average perpetual valuation method, the current cost amount appears on the transaction. However, this cost may not be the cost that is used at the time of posting. At the time of posting, the system takes the quantities from the first available receipt layer. The cost that is used is pulled from the layer that has the closest date to the transaction.
FIFO periodic
Items purchased first are considered sold first (First In, First Out), and are valued at their standard cost. To update the standard cost, you can use the Inventory Year-End Closing window. At the end of the year, the standard cost can be adjusted to the current cost.
LIFO periodic
Items purchased last are considered sold first (Last In, First Out), and are valued at their standard cost. To update the standard cost, you can use the Inventory Year-End Closing window. At the end of the year, the fixed cost can be adjusted to the current cost, or the cost of the item the last time it was received.
For periodic valuation methods
When you sell an item by using a periodic valuation method, the cost for each quantity that is sold is the value that is displayed in the Standard Cost field in the Item Maintenance window.
How the inventory value on the Stock Status report is calculated in Microsoft Dynamics GP
The inventory value on the Stock Status report is calculated based on the following item valuation methods.
FIFO or LIFO Perpetual valuation methods
The on-hand quantity is multiplied by the cost at which the item was received.
Average Perpetual valuation methods
The on-hand quantity is multiplied by the current cost of
the item.
FIFO or LIFO Periodic valuation methods
The on-hand quantity is multiplied by the standard cost of the item.
If you have questions regarding how to Change Valuation Method, see our article at: https://www.isolutionspartners.com/2020/02/11/dynamics-gp-change-valuation-method/
Note: Content for this article came from Microsoft Dynamics GP Help text with screenshots added.
See this Microsoft Support article:
Enhancements made to the calculation of Average Cost in:
Contact us if you have questions regarding Dynamics GP Cost Valuation Methods at: support@isolutionspartners.com
To view our previous articles, go to: https://www.isolutionspartners.com/articles/
