Cost of good sold seems incorrect
Hi All,
I'm keen to get a better undertsanding of why our COGS seems incorrect for items that we buy and sell as inventory.
I understand the basic principal of the average method applied but I struggle to understand why our cogs grows exponentially until we enter in another container of goods, I've attached a sample of an item & how the cost grows for the product. The item attached costs approximately $18.50 per item however at some stages through the month (e.g late April the average is over $2000).
Any help would be appreciated please,
Thanks, Liz
Hi LizMani , the extreme unit cost figures arise when stock onhand qty goes very low or negative, and can be ignored.
However, your cost of sales appears to have been under-recorded, eg at the start, the purchase unit cost is $20.16, yet the sales around then all have a COGS of $18.50 (which was possibly the last cost). Your stock level never goes to nil, therefore AccountRight never gets the chance to zero out the onhand value. Also there are lots of transactions. In these circumstances, you should manually adjust the cost on hand to a reasonable figure from time to time, including at balance date; the excess value at present appears to be around $20,000.
