When using Microsoft Dynamics GP for inventory valuation, it is important to determine the correct method of inventory valuation that suits your specific needs.
The solution is not simple, however, because different valuation methods have distinct impacts on the General Ledger. If the entire inventory sold today, the LIFO/FIFO Perpetual valuation methods would cause the GL to have a balance of $0.
To the contrary, differences would exist in the GL balance with other valuation methods, such as with Average Perpetual/Periodic valuation. When an item is received, sold, decreased, or transferred in inventory using the FIFO/LIFO Perpetual valuation method, the actual cost is posted to the GL.
The FIFO/LIFO Periodic valuation method, though, uses an item’s actual cost to post to the GL only when the item in received in inventory. The item’s standard cost posts to the GL when the item is sold, decreased, or transferred.
Finally, the Average Perpetual valuation method
posts an item’s actual cost to the GL when the item is received in
inventory but posts its average cost when the item is sold,
decreased, or transferred in inventory.
These differences in valuation methods can have a profound impact on the General Ledger and other financial reports, making inventory valuation a consideration that should not be taken lightly.