When setting up inventory in POS for the first time, POS will automatically enter an adjustment memo to update your inventory value when you enter a value in the Average Unit Cost or the On-Hand Quantity fields when adding a new item. Before doing so, a message will pop up asking you to Continue or Cancel Edits to the field that prompted the pop up message. Click Continue. During first time setup, you’ll be recording both an On-Hand Quantity and an Average Unit Cost, so you’ll see the pop up message at least 2 times. When you save the item, POS will automatically record an adjustment memo for your starting inventory valuation and quantity for that item. In this example, we’ll record 10 units of a new item at an Average Unit Cost of $12.00.
Let’s carry our analysis one step further to see how to record new receipts of an item following our initial setup.
Once you’ve recorded your initial On-Hand Quantity, click the Receive Items button to record a New Receiving Voucher for 1 or more items. In the New Receiving Voucher window, you record the Qty (the quantity received) and the Voucher Cost (the cost for the latest delivery). Simply click in the field to change the default value. In the example below, we’ve recorded a receipt of 10 units at a cost of $5.00.
Because the new $5.00 cost is considerably lower than our original cost of $12.00, POS will pop up a message advising us that the latest voucher has a different cost than our existing inventory and give us a chance to review the pricing for that product. We’ll review product pricing at another time and click No, I’ll Review Prices Later.
To summarize, our initial inventory during first setup of POS consisted of 10 units that cost $12.00 each. Following setup, we vouchered a receipt of an additional 10 units at $5.00. Since QuickBooks and POS operate on the average cost method, our new Average Unit Cost for this inventory item is $8.50, or ( ( 10 units X $12.00) + (10 units X $5.00) ) / 20 units.