Changing Inventory Item Methods
There are several inventory methods available. You can choose the one that suits you best according to whether you plan to track inventory item stock levels.
You may have started using the inventory system in a particular way only to later receive advice or learn that another way is better for your business. Simply changing the setting under Inventory Items won't create this change if you have already created transactions using these Items. This is because historical transactions are affected. If Saasu simply allowed the change it could create differences to what you have already reported to advisers, tax authorities, etc.*** Your chosen inventory method has tax implications ***
Before choosing or making changes to your inventory accounting methodology be sure to check with your advisor and consider the impact on management reports, tax remittances, and the like as a result of changing historical transactions. As a general rule, changing historical information in accounts may lead to differences between what you report to advisors and tax authorities versus what is in your accounting system.
Here's two common situations you might be trying to change and how to best handle it.
Inventory, Buy, Sell ---> Buy, Sell
You have been tracking stock using the perpetual inventory system using an Asset:Stock category or similar. That is, your inventory items are set up with Inventoryticked.When the Inventory Item has been used in transactions:
- Duplicate your inventory items and save them with new item codes. Re-assign purchase and sales transaction items to these new inventory item codes. Note that you need to work from the most current transaction backwards to the oldest transactions as the inventory system won't let your inventory levels go negative.
- Start a new inventory item and Item Journal all the inventory held under the Inventory method over to the new code(s).
- Delete all and then re-enter all transactions attached to the inventory items. This approach isn't recommended when you have lots of historical data.
- Set old inventory items that will no longer be used as Inactive.
When the inventory item has NOT been used in any transactions:
- Find the inventory item in the Items list by selecting Items > Items from the main menu.
- Click on edit icon to access the Edit Inventory Item screen.
- Untick Inventory.
- Click Save.
Buy, Sell ---> Inventory, Buy, Sell
You have been buying and selling inventory items but not tracking the amount on hand in an Asset:Stockcategory or similar. You decide to keep track of inventory items. If the inventory item has been used in transactions:
- Duplicate the old inventory item.
- Create a new item code (eg something similar to the old code for this item).
- Tick Inventory.
- Select an Asset Account.
- Click Save.
- Set old inventory items that will no longer be used to Inactive.
If the inventory item has NOT been used in any transactions:
- Find the inventory item from the items list by selecting Items > Items from the main menu.
- Click the edit icon to access the Edit Inventory Item screen.
- Tick Inventoryand select an Asset Account.
- Click Save.