Inventory Overview

Inventory used in manufacturing is entered via Manufacturing Receipts either when entering the manufactured item receipt quantity or separately when the materials to be used are removed from storage. If you don’t want the plant personnel to have to record quantities used, you can let the usage default to the quantities specified on the Manufacturing Order (which default based on the quantities specified on the Item) prorated by the quantity produced. Or you can enter the quantities used and track variances via the Material and Resource Usage Reports.

Sales may be entered as as Sales Orders and Shipments, which then create AR Invoices, or directly as AR Invoices. Inventory Quantity On Hand as shown on the inventory value reports and perpetual inventory reports is depleted when the AR Invoices are posted (so as to keep the inventory value in synch with the accounts receivable). Whereas Quantity Available as shown on the Inventory Totals screen and Quantity Available report (Purchase Orders Reports, Sales Orders Reports, Manufacturing Reports) is depleted for shipments that haven’t yet been invoiced. Quantity Available is always the current quantity in the warehouse.

Warehouse transfers, and reduction of inventory due to spoilage/breakage, theft and samples, etc. are entered via adjustments.

Physical count corrections may be entered directly as adjustments or the physical count may be entered via the Physical Count feature. This prints count sheets, allows entry of the physical count, prints variance reports, and generates adjustment transactions.

The GL inventory account(s) are updated by Journal Vouchers created automatically from AR invoices and AP Invoices, and Journal Vouchers entered directly to the GL. They aren't updated by purchase orders receipts, manufacturing receipts or usage, adjustments, by changing a cost manually, or by changing the item to a different item type that uses a different costing method or is non-inventory.

At period-end you should enter an accrual (reversing JV) for any inventory that has been received but you haven't yet received an AP invoice. (Debit Inventory and credit AP journal). To facilitate the accrual and to ensure that you don't get billed twice, etc. by the vendor:

•	When the goods arrive the receiving document is matched to a copy of the PO and sent to the AP clerk.

•	The AP clerk maintains a file of outstanding (unbilled) receipts (PO and receiving document). When the AP invoice is received it is matched to the PO and receipt, which are filed with the AP invoice. At period-end any outstanding (unbilled) receipts are totalled and used for the accrual.

Also at period-end you should enter a reversing JV to record any WIP (manufacturing work in process) which you get from the Material and Resource Usage by Order Report.(Debit WIP and credit Manufacturing Gain/Loss).

•	finished goods produced. (Debit Inventory and credit Manufacturing Gain/Loss).

•	materials used. (Credit Inventory and debit Manufacturing Gain/Loss).

•	resources used from Resource Usage Summary Report. (Credit Resource Expense and debit Manufacturing Gain/Loss). AP and payroll resource expenses will debit the expense account.

Then you should print a Value by GL Account /Item report and enter a JV to synchronize the GL inventory account(s) to the inventory report (typically one entry to Inventory and the opposite entry to Cost Of Goods Sold) to account for any adjustments or manual cost changes, etc. or weighted average cost discrepancies caused by selling negative inventory (for example if the receipt wasn't entered yet) where the sale would update the GL using the old cost.