Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Chapter 23
Chapter 24
Chapter 25
Chapter 26
Chapter 27
Chapter 28

Chapter 28

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Movement through inventory

Entry of parts or merchandise into inventory is normally through purchasing.  Typically, they will be bought on account in the Accounts Payable system (Chapter 9) or by using Write Checks.  Each purchase is brought in at the purchase price specified, but all subsequent inventory movements are valued at the average cost for all units of that item then in inventory. 

When an item is sold, it is removed from inventory. The on-hand quantity on the ItemList is reduced.   The value of the items sold is calculated as the product of the average unit cost times the number sold. The balance in Inventory Asset is reduced by this value.  If the default was accepted at item setup, the cost will go into Cost of Goods Sold. 

The invoice (or other sales document) handles the removal of items from inventory, but the action is somewhat out of sight. Nothing on the invoice directly indicates an inventory action.  Examining the Inventory Asset account, invoices will appear with a figure in the Decrease column.  This amount is the number of units sold, times the average value.  If you Edit this transaction, you merely see the invoice, which names the item and states the count of units sold.  To find the average price at the time, you would have to divide the number sold into the Decrease figure.  The value changes will be seen to be based on exact pricing, using fractional cents if necessary.


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Last modified: May 21, 2004