You can view and update the average cost of an item by cost element and level (this level and previous level). You can update average costs using a percentage change, a new average cost, or a value change. A change made to the total unit cost of an item is spread to all cost elements and levels in the same proportion as they existed before the update.
The offset to the inventory revaluation in all cases above will be booked to the Average Cost Adjustment account(s) you specified at the time you perform the update.
Note: The average cost update feature is intended to be used sparingly to correct a transaction costing error affecting items in subinventory. If the cost error is in WIP, the impacted quantities will need to be returned to a subinventory, corrected there, then reissued to WIP after the update has been completed.
If the adjustment increases inventory, then the accounting entry is as follows:
Note: The following average cost update accounts are the default accounts when average costing is used. If Subledger Accounting (SLA) is enabled and SLA rules are customized, then the default accounts are not used.
| Account | Debit | Credit |
|---|---|---|
| Inventory Valuation accounts @ current average cost | XX | - |
| Adjustment account @ current average cost | - | XX |
If the adjustment decreases inventory, then the accounting entry is as follows:
| Account | Debit | Credit |
|---|---|---|
| Adjustment account @ current average cost | XX | - |
| Inventory Valuation accounts @ current average cost | - | XX |