How to Balance INV to the Ledger

How to balance Inventory to the Ledger

Inventory & General Ledger Balancing: Inventory Balancing Process

One of the basic functions of any accounting operation is to balance the Inventory Subsidiary Accounts with the General Ledger. However, this is the one area that is often overlooked or forgotten. Within the Agris system, the following steps should be performed:

1. Run the Cost Adjustment Procedure; updating files and creating entries.

   1. This process should be done while everyone remains out of Inventory.

   2. Any transactions that affect inventory should not be entered during this process.

2. Create your SJI entries for the period you are closing.

   1. Make certain that you inform all other employees that you are closing the month and that they should NOT enter any further transactions for that specific month.

   2. Adjust your date range (earliest and latest date allowed) to avoid the possibility of backdated transactions in Customize > Date Groups.

   3. Be sure and transfer these entries to ledger for posting in LDG > Journal Entries > System Journal Entries.

   4. Make sure that all transactions post and that you do not have any "invalid" entries.

      1. If you do, correct those prior to running a General Ledger Trial Balance Report.

3. After posting your SJI entries in Ledger, print a Trial Balance Report for the period you are closing and wanting to balance.

   1. LDG > Report Manager > Journal Entry Reports > 1. Print Standard Reports > 4. Trial Balance Report

4. From this point forward, any reports or processing that is done, must be done when no one is in that specific package or your numbers may be inaccurate.

   1. The processing can be automatic (unmanned) and can be handled at a time when employees are not in the system.

   2. If you close your month prior to anyone entering a future month's transactions, then run an Inventory Item Report.

5. Run an Active Delivery Ticket Report. Combine the totals of this report with the Inventory Item Report. Do not print Item detail. Print only the totals for each product category.

   1. The total of the two reports should balance to the General Ledger balance for Inventory.

   2. If your inventory balances in ledger are divided by certain product category ranges, then you will need to add the specific categories together on the Inventory Item Report in order to compare to your General Ledger.

6. If you are closing your month end after a future month's transactions have been entered, then you will want to run an Inventory Activity Summary Report. Be sure and subtotal by Product Category with no detail. The date range should be the beginning and ending dates for the period in which you are trying to balance. BE SURE to say "Y" to "Adjust out currently active delivery tickets?" The reason is that a delivery ticket does not remove the values from General Ledger and won't until an invoice is created. The inventory activity summary report shows the inventory balance minus the delivery ticket values unless you answer "Y" to the question. Basically, we are trying to compare "Apples to Apples". Use this report to compare to your General Ledger balances.

Out of Balance Research

If the Subsidiary balances do not match to the General Ledger Account Balances, here are some processes you may take to determine the difference.

1. In SJI, build an Execution ID Work File from the first day to the last day of the period you are trying to balance. You may desire to build the
   workfile for two months. Then you will be able to verify totals for the two prior months (see further comments below).

2. Run a Transaction Analysis Report for the period, subtotaling by Product Category and without detail, for the specific General Ledger Account Code.

   1. The dollar amount on this report should be the amount of change shown on the General Ledger Account Inquiry Screen for the period.

   2. If they do not balance, then, See if any manual journal entries were posted to this account. If yes, determine why and make sure that an offsetting entry was made to the specific inventory item. Normally a manual journal entry is never made to an Inventory account unless there has been an offsetting stock adjustment made. See if there were any manual Bank, A/R or A/P transactions, determine if the general ledger distribution was coded to an Inventory Account. Normally, a manual transaction is not coded to one of these accounts.

3. If the totals for the period match, then run the same report for the period prior to the one you are trying to balance. Balance it to the specific
   General Ledger Account code. If the amounts do not match, then:

   1. Determine which product categories are out of balance and run an Inventory Activity Report. On the value selection criteria screen, enter the dollar value on the "Total Cost" line with the option of "1". This will identify if there was a single transaction that caused the outage. If there were multiple transactions that affected the outage, running this report in this format will not identify the problem.

   2. Run the Transaction Analysis Report for the specific category WITH detail and compare the document numbers to the original SJI reports. Oftentimes, the document number of the "backdated" transaction will be out of sequence or will be one of the last document numbers used.

4. After determining the problem, make the necessary adjustment to inventory or Ledger. At this point, your accounts should be in balance.

*The process from this point forward can been designed to run in a report stream (V8.2). You may process the data from the report stream or run the reports individually. A suggested report stream might include **:

Report Dates

Inventory Item Report E.P.M.
Active Delivery Ticket Report
Inventory Activity Summary Report B.P.M. E.P.M.
Build Execution ID Work file B.P.M. E.P.M.
Transaction Analysis Report B.P.M. E.C.M.

**Before you create the report stream, you will want to create user defined reports based off of these standard reports to create your default dates & specific parameters. Reporting Dates can also be used when designing these reports.

Helpful Links for More Information:

Detail Balancing of INV

Month End Procedures

Document copied from AGRIS > Help > Frequently Asked Questions - S. Pykare 8.16.23