Hi Andrew,

Our inventory and all Adagio was frozen so there were no entries of any kind on Adagio between the time we created the worksheets and posted the inventory reconciliation.

Here's what I did:

1. Printed Physical Inventory Worksheet (created a workfile).
2. Counted and then imported the Physical Inventory Worksheet with the actual count.
3. Printed Inventory Reconciliation (uses average cost and reverts to recent when there is no average cost).
4. Posted Inventory Reconciliation (uses recent cost). <- This is the problem.

I assume I have been posting recent costs all these years and not realized it because I assumed that I was posting the same amounts as the Inventory Reconciliation said. This year I checked and discovered that the adjustments that are posted are all using recent cost.

To avoid this problem going forward I made a note to use this method instead:

1. Print Physical Inventory Worksheet. Create a workfile (spreadsheet).
2. Count and add quantities and costs to spreadsheet. Use average unit cost when the original qty is greater than zero. Use recent cost when original qty is zero.
3. Total up the quantity variances times the cost in the spreadsheet to determine total loss or gain.
4. Import Inventory Adjustments for variances including the cost. Post.