did you ever purchase merchandise and forget to change the purchase cost
to the new purchase cost when you were recording the vendor's bill or the check
if that's the case then you need to understand the effect of retroactive purchase cost changes
if you have any questions about this topic you can leave them in the comments section below and i'll
do my best to help you and of course if you feel the video helped you i hope you will click like
and don't forget to subscribe to get updates on new videos that come out all the time
retroactive purchase cost changes have an effect on your cost of goods sold
and your merchandise inventory as well as your profit and you need to understand the effect
we know that purchasing inventory at a new cost will change the average cost per unit
if we sell an item after purchasing with a new cost the new average cost will be used
to find the cost of goods sold for the sale or any future sales however if we change a past purchase
to a new unit cost quickbooks will recalculate every subsequent sales cost of goods sold amount
from that moment going forward so this is what inventory looks like now it was the check that
you paid when you bought apples from sam on may 2nd that changed the average cost of apples
from ten dollars to ten dollars and fifty four cents but what if in the past you made a mistake
what if you forgot to change the june 8th purchase cost on the bill for apples that you uh received
when you received the apples back on june 8th what would happen well in that case june 13th sale
or the cost of goods sold amount for the following sale would be different because the average cost
should have changed on june 8th so therefore the sale that you made on june 13th
would have a different cost of goods sold let's take a look let's imagine on the june 8th bill you
accidentally forgot to change the cost each to 12 dollars and 50 cents so let's go ahead and change
it to twelve dollars and fifty cents and see what happens to the average cost going forward
so here we are on the inventory valuation detail and here we are at the june 8th bill that's when
you double click it says we bought these items for ten dollars each let's change this to 1250
because it should have been 12.50 do you want to update apples with the new cost click yes
now if you chose yes the new amount of this bill is eight hundred and twelve dollars and fifty
cents save and close are you sure you want to uh change this because it's linked to others yes
okay not in balance you just have to make sure that the new amount that calculates on the bottom
is equal to the amount due in total on the top that's with any transaction in quickbooks so we
click save and close and click yes we want to change it notice starting from june 8th
the new cost per apple or average cost per apple is 10.55 and that means on the sale and on the
inventory adjustment for the two transactions going forward the cost of goods sold excuse me
the cost of goods sold and the cost of each apple were 10.55 each do you see that so if i double
click the invoice on june 13th the sale amount and the income amount would be the same but if
i click reports and i click transaction journal you will see that 750 of income is still the same
but you will then notice that the cost of goods sold for that sale has changed from 150 to
and fifty eight dollars because it's taking the new average cost from what it calculated
from the prior purchase so you have to keep that in mind and notice that not only did it
change the subsequent cost but as of the next purchase where the cost changes it even changed
that amount because then the calculation for the average cost in weighted average would be
different because the prior amounts were different so every time there's a change in purchase cost
you can actually see the date of the new purchase cost change because it will be the moment that
the inventory valuation detail shows you a newly calculated average cost per unit you