FIFO/LIFO Costing on the Inventory Adjustment Worksheet
If you enter an inventory adjustment worksheet for an item using FIFO or LIFO costing, NetSuite recalculates costs using average costing, instead of FIFO/LIFO.
For example, if you don't receive and build an item before fulfillment, the item can go underwater. You fulfill and invoice an item in January, then receive and build it in February. That means costs are understated for January and overstated for February.
When the inventory level is negative, costs are understated because NetSuite estimates the cost based on the last transaction cost while above water. When inventory goes back above water, a cost adjustment accounts for the period of costing to bring inventory to an above water state. This results in NetSuite reports showing understated or overstated costs during these two periods.
When NetSuite uses average costing, the worksheet sells the items and then buys them back at the cost you enter. When this happens, you lose all FIFO/LIFO history.
Best Practices
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Use the inventory adjustment worksheet only for items that don't use the FIFO or LIFO costing methods.
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Avoid using the inventory adjustment worksheet for an item that's underwater. In those cases, the worksheet only creates links to the negative items.
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Use the Inventory Count page to update the physical count, rather than an inventory adjustment worksheet. You can also use an inventory adjustment.
For more information, see Inventory Adjustments.