D365 – BC “The Logic Behind #2” – Date & Cost

Hello Everyone,

We're going to look at this interesting topic. How much importance is given to dates in Business Central when it comes to calculating costs? To identify the accuracy of the cost calculation, I have done the following assessment for costing method "Average":

Scenario 1: Record a negative adjustment on Current Date

Based on above scenario, I made a positive adjustment entry on March 31, 2023, bought the same item on April 24, 2023, and made a negative adjustment entry on April 25, 2023.

Later, I am posting backdated sales entry. This is where Business Central did its magic and automatically adjusted the cost for negative adjustment entry and recorded the adjustment entry.

In the above picture you could see the cost has increased by $0.53.

Why it got adjusted? What's the reason behind it?

As per IAS-2 (Inventories) a systematic approach to allocate costs to inventory items based on their quantities and unit costs. It offers a fair representation of inventory value, especially when inventory purchases occur at different costs over time.

Scenario 2: Record a negative adjustment on the opening balance date with manually updated unit costs.

Based on above scenario, I made a positive adjustment entry on March 31, 2023, bought the same item on April 24, 2023, and made a negative adjustment entry on March 31, 2023. When I recorded negative adjustment entry, I manually updated Unit Cost as $115.

In the above picture (value entries for negative adjustment transaction), you can see the cost has adjusted to $100 (reduced by $15 automatically), even though I updated it manually.

Still confused, Right?

In above example, an item has a positive adjustment with per unit cost of $100 and I made a negative adjustment on the same day with per unit cost of $115. Since the item has initial entry (positive adjustment) at $100, Business Central checks the average cost as at specific date ($100 in this case, as there is only one entry) and auto updates it to $100 which leads to accuracy of the item cost. This simply means, Business Central ignores incorrect manual cost recorded by user when doing negative adjustments.

Conclusion

"Business Central is in full compliance with Accounting Standards, executing processes flawlessly and without any errors, even in instances where users may attempt to input incorrect data."

It is Users' responsibility to update correct date, when there is a need to adjust inventory for prior period. Any mistakes on date would have significant impact."

Research collaboration with Magiltharan Sivarajah