Please be noted that the 'reason code' is a new feature that was introduced in GP 2013. In summary, it is a very good idea to setup a specific inventory offset account depending on the reason code. The cost of goods sold is the cost of the products that have been sold to customers during the period of the income statement. The total cost of producing the shoes is 60. This means, when you record an increase/decrease adjustment, you choose the reason code to justify this adjustment, if you choose a 'Damage' inventory offset account for instance, the inventory offset account will be something like Inventory Damage expenses.Īnother example I have seen a manufacturing company which manufactures biscuit, they used to issue daily biscuits to for hospitality in the meeting rooms, these quantities are reduced by recording a decrease adjustment with a reason code (hospitality), and the inventory offset linked to this code was (hospitality expenses) When a change in quantity is made through a stock count or stock adjustment or an inventory cost change is made, the change in inventory value is posted to. Suppose Zappos sold a pair of shoes in June for 100. The above has been automated through what's called 'reason code', you can setup different reason codes with different inventory offset account. etc), and I am totally with the suggestion you heard from the consultant. The cost of an item is determined at the time you receive it into inventory through a purchase or an inventory adjustment. Although, I believe that we should differentiate between the usual COGS account used for tracking the cost of items when recording a sales transaction for instance, and the cost account used on the adjustment transaction entry for reasons such as (damages, spoilage, hospitality, stock count variances. Adjustments cannot be re-loaded or re-opened therefore the GL Entries require manual update from the Accounting Interface Screen. When you create invoice or sale receipt, it will also post COGS at 100 each unit). So basically, it indicates using a COGS account. Under Item details section > enter product/service item, quantity and the amount same as above account details.

The explanation provided on the help file of Dynamics GP is thorough, it is mentioned above by babu.

Inventory adjustmenr vs cogs account