DBD: Inventory and Job Costing Reconciliation Guide

Reconciling your inventory at the end of each month ensures that your physical inventory valuation aligns perfectly with your General Ledger (GL). This process involves gathering data from your purchasing, inventory, and ledger modules to account for goods received but not yet invoiced.

Step 1: Gather the Required Reports

To begin the reconciliation process, print or export the following reports to PDF so they are easily searchable.

1. Open Purchase Order Report

Navigation: Order Processing > Purchase Orders > Reports
Action: Run the report for Receipts pending AP.
Key Data: Go to the bottom of the report and locate the Bill as Shipped total. This represents inventory that has been physically received, but the vendor invoice has not yet been processed.

2. Valued Inventory Report

Navigation: Inventory Control > Reports
Action: Run the report for distributor-owned inventory (typically warehouses 0001-8999 ).
Key Data: Locate the Report Total at the bottom. This is the total value of your distributor-owned inventory.

3. General Ledger Report

Navigation: General Ledger > Reports
Action: Run the report for your Inventory and Inventory in Process Asset accounts.
Key Data: Note the Ending Balance for your main inventory asset account(s).

4. Inventory Costing Transaction Report

Navigation: Inventory Control > Reports
Action: Run the report for all inventories (recommended export format: TopForm).
Key Data: Cross-reference this report with the order numbers from your Open PO Report. Look for "Freight" or other special charges that have an estimated cost applied to the inventory lot.

Note: These estimated special charges increase the lot value on the Valued Inventory Report but are not yet in the General Ledger because the AP invoice hasn't been received. Write down the total of these applicable special charges.

5. Detail Transaction Report

Navigation: Inventory Control > Reports
Action: Run the report for warehouse codes 0001-8999 , filtered for the specific Fiscal Year and Accounting Period you are balancing. Look specifically for R-Receipt types.
Key Data: Search for transactions with the Source Journal code IT. Sum the amounts of these specific transactions.

Step 2: The Reconciliation Formula

Once you have gathered all your figures, use the following calculation to determine your Adjusted (Real) Inventory Total, then compare it to your General Ledger.

Calculation Steps

Step	Report / Account	Action
1	Valued Inventory Report Total	Start with this amount
2	Open PO Report (Bill as Shipped total)	SUBTRACT
3	Detail Transaction Report (IT Source Journal total)	SUBTRACT *
4	Inventory in Process GL Account Balance	SUBTRACT (if applicable) *
=	Adjusted Inventory Total	Your True Inventory Value

* Alternative Accounting Methods: > * Instead of subtracting the IT Source Journal total (Step 3), your team may choose to make a manual journal entry to the Inventory Asset GL account to record these totals.

Instead of subtracting the Inventory in Process balance (Step 4), you can choose to pass a journal entry to zero out/reclassify this dollar amount.

Step 3: Final Verification

Compare your calculated Adjusted Inventory Total against the Inventory Asset GL Account Balance from your General Ledger.

If they match (or fall within your company's variance tolerance): Your inventory is successfully reconciled for the period.
If there is a discrepancy: Review your IT Source Journal transactions and look for any unrecorded GL entries or missing AP invoices from the current period. Make any necessary adjusting entries to the GL according to your company’s standard accounting practices.