Average Cost: How Your Magaya System Calculates the Average Cost of Inventory Items

May 22, 2015 | Education

If you buy and sell inventory, or are thinking about adding this service to your business, read this article about Average Cost of inventory items.

Did you know Magaya software enables configuring your system to calculate the Average Cost of Inventory Items? Your Magaya system can be configured to define the cost of an inventory item as “specific” or as “average.” You have the option to set it system-wide or per item.

Average Cost Configuration

The Average Cost method calculates the average cost for inventory items (in contrast to a specific identification method). The Magaya system calculates the average of all the inventory items you have purchased. Every time you sell an item, the system will add the amount to your “Cost of Goods Sold” account and deduct from the Inventory Account for that item.

Sections in this topic include:

  • How to configure average cost system-wide and per item
  • How to create a resale item as an “average cost” method item
  • Purchase items and create bills
  • Sell items and invoice them
  • See the purchases and sales on the Balance Sheet