Item cost changed at physical inventory journal posting

sajidhanifkhan wrote:

Hi Kowa,

We are using FIFO costing method and no I did not run the cost adjustment but it applies the cost automatticaly while posting since I have marked Automatic cost posting in inventory setup and automatic cost adjustment is always. Average cost period is zero in inventory setup.

I still did not get the reason. Please suggest if the inventory setup is correct as I mentioned above?

If you have automatic cost adjustment set to "Always", the adjustment takes place when the journal is posted, that means the FIFO valuation is available immediately. You can run the manual cost adjustment just to make sure that everything has been adjusted (some older entries may have stayed unadjusted, especially if the automatic cost adjustment was set to some other option than "Always" at some time).

The average cost period is only relevant if you use "Average" as your costing method. (BTW:The NAV standard has no "zero" setting, you select periods. Up to version 4 , it was always a daily average, but Version 5 offers longer periods too).

You can't determine the FIFO valuation before posting. All you get from the journal is a more or less accurate assumption. Just one example:
NAV calculated 3 items with an average unit cost of $10 . These were purchased in 3 separate purchases at $9,$10 and $11. You counted only 2, so the average valuation would be $20. NAV posts a negative adjustment. FIFO chooses the $9 purchase, and so the FIFO valuation for the remaining entries is $10 + $11 = $21. In this case, it is higher, in other cases it may be lower. That depends on how the purchase prices have fluctuated. It can also be combination, if the negative adjustment entry was not applied to a single purchase but to several different purchases. In the latter case, the FIFO valuation for the adjustment is a weighted average calculated from the applied quantities for each purchase and the corresponding cost amounts.

sajidhanifkhan wrote:

My point is that if system is calculating the weighted average for the applied quantities and showing me the value in test report why it changed after posting?

The average unit cost from the item or SKU card (this is copied to the journal line) is calculated
by the standard formula :

(Beginning Inventory + Net Purchases - Cost of Goods Sold (COGS))/ Quantity

If SKUs are used, this will be location-specific or variant-specific.

The Beginning Inventory is always 0, because NAV sums up everything starting from the first value entry. Net Purchases and COGS should be considered in a broader sense as any cost amount increase and any cost amount decrease.

That is your overall average, but that has nothing to do with the weighted average FIFO uses if there is more then one item application entry involved. This is calculated solely for this particular application to determine the "Cost amount (actual)" for the adjustment entry.