Year-End Inventory Processing

The Step-by-Step Guide

This plan covers year-end closing procedures for inventory in Exact Globe. Follow the steps below to complete the entire year-end closing process:

Logistical reconciliation of receipts and purchase invoices
Valuing all shipments in the ‘old’ year
Performing a correction count
Inventory Revaluation

Step 1: Logistically reconciling receipts and purchase invoices

To ensure that all receipts are recorded at the correct value, it is important to reconcile these receipts with the corresponding purchase invoices.

Navigate to [Inventory > Warehouse Management > Reconciliation] or [Purchasing > To Be Processed > Reconciliation].
Enter the required criteria (in Advanced mode).
Click ‘Refresh.’.
Zoom in on the displayed data by clicking the ‘Zoom’ button, or export it to Excel using the ‘Export’ button if desired.
Automatic tuning is also possible using the ‘Automatic’ button.

The example below explains the importance of reconciliation. The journal entry for the receipt looks like this:

Invoice	Date	Debit	Credit
Purchasing	5-12-2020	100
Invoices/goods still to be received	5-12-2020		100

The journal entry for the purchase invoice looks like this:

Invoice	Date	Debit	Credit
Invoices/goods still to be received	7-12-2020	120
Accounts Payable	7-12-2020		120

During the logistics reconciliation, the ‘Invoices/Goods Still to Be Received’ lines from the receipts and purchase invoices are reconciled with each other. After reconciliation, the journal entry for the receipt looks as follows:

Invoice	Date	Debit	Credit
Purchasing	5-12-2020	120
Invoices/goods still to be received	5-12-2020		120

Reconciliation affects both the balance in the ‘Invoices/Goods Receivable’ account and the balance in the ‘Purchases’ account. It is therefore advisable to reconcile as often as possible. before you will report the final figures

Step 2: Valuing all deliveries in the ‘old’ year

Deliveries are initially recorded at the cost price of the item as defined at that time. Using inventory valuation, you can adjust the deliveries according to the valuation method used by your organization. Inventory valuation actually adjusts the delivery journal entries and therefore affects the year-end financial statements.

Go to [Inventory > Warehouse Management > Inventory Valuation].
Use the selection criteria to select the inventory you want to value.
Next, click the ‘Process’ button.

When you use the ‘Classic VVP’ inventory valuation method, inventory valuation is not required, so there is no menu path for inventory valuation.

For example, the delivery journal entry for inventory valuation looked like this:

Invoice	Date	Debit	Credit
Deliveries (Profit & Loss)	5-12-2020	60
Purchasing (Balance Sheet)	5-12-2020		60

After the inventory valuation, the delivery journal entry is adjusted and looks like this, for example:

Invoice	Date	Debit	Credit
Deliveries (Profit & Loss)	5-12-2020	70
Purchasing (Balance Sheet)	5-12-2020		70

If the deliveries have already been properly valued for certain periods, you do not need to include these periods in the valuation again. By using the date range, you can ensure that deliveries that fall outside this range are not adjusted by the inventory valuation. The ‘Transaction Date’ field is not displayed if you have checked the ‘Inventory Valuation from Last Revaluation’ option in the inventory settings. In that case, the date of the last revaluation transaction is always used. You can also ensure that deliveries in those periods are no longer adjusted by closing out periods.

Please note: You cannot set up a date range if your valuation method is ‘Fixed Transfer Price.’ If you have changed the cost price of the item during the year and do not want inventory valuation to adjust deliveries made before that change, you must close the periods..

Step 3: Performing a correction count

At the end of the year, the actual inventory in the warehouse may no longer match the inventory balance in the records. To verify this and make any necessary corrections, perform a count (or inventory) by following these steps:

Go to [Inventory > Warehouse Management > Counts].
Click ‘New.’.
Use the selection criteria to select the items you want to review and correct.
Enter the date on which the adjustment entry must be recorded in the records (transaction date) as the reference date. If you do not enter a date, the current date (which is already filled in) will be used.
Click ‘New.’.
Next, enter a correction count.
Click ‘Process.’.

Please note: With the VVP, FIFO, and LIFO inventory valuation methods, the journal entry generated by the inventory count has no value. Only when the revaluation Once the count is complete, it affects the inventory value.

Step 4: Revaluing Inventory

To ensure that inventory is recorded at the correct value on the closing balance sheet, it is important to revalue the inventory. The revaluation aligns the value in the general ledger account with the inventory value according to your chosen valuation method, should the two not yet match. After you have adjusted the inventory quantities for all items—possibly through a corrective count—you can use the revaluation to ensure that the value in the Purchase Accounts is consistent with your chosen valuation method. The revaluation journal entry is created on the entered transaction date. It is recommended to select 12/31/2020 for this.

Go to [System > Logistics > Revaluation].
Here, you can select the inventory that needs to be revalued, if applicable.
Click ‘Start.’.
On the next screen, you can select the rules that need to be revalued.
Click ‘Process.’.

After the revaluation, you can go to [Inventory > Reports > Inventory Positions] to verify that the inventory value matches the value shown in the Accounts Payable section of the balance sheet, which you can access via [Financial > Balance Sheet/Income Statement > Balance Sheet/Income Statement].

The result

Once you have completed these steps, the entire year-end inventory process is complete. In addition to inventory, we also have step-by-step guides for performing year-end processing for: