Running Average Price Calculation - Correcting the Average Purchase Price

This help article discusses how the running average price works as a stock valuation method, and how to update and correct the average price. The running average price is obtained by adding the latest and previous purchase, and dividing the sum by the number of units. This model is used to update the unit price of a product in stock.

CONTENTS

• Average price update
• Average price correction

The running average price is a stock valuation method obtained by summing the latest and previous purchase together, after which the total value of purchases is divided by the total number of products.

Costs are calculated based on the running average of units.

This unit price is updated for all products in stock as the unit price, and this calculation is repeated whenever a new batch of purchases arrives in stock.

Average price update

If stock entries of purchases need to be modified afterwards, the changed average price can be updated to the product card using the function "Update average price from stock information" 

This can be found by opening the desired product card and then the stock information section.

Average price correction

If the average price cannot be corrected by changing stock entries for some reason, the known correct average price can be updated to the product as follows:

1. Check the current stock balance and average price for the product.
2. Place the product in the process basket and perform inventory for the products. This can be done by searching for the product through the product listing and checking it. From the bottom, select add selected to process basket. In the process basket, select perform inventory for products. 
   Set the quantity and price to zero, which will zero out the stock for this product.
   In other words, change the value of the Unit price field to zero.
   Original situation. Average price (unit price is 8 and stock 1 has 10 pcs of the product and in stock Store 5. Total 15 pcs.Change this unit price to zero and also the value of possible stocks to zero. Then save the information.
3. Check if there are products in stock whose balance is zero but have value (=run correction report to zero out stock value if necessary). Stock management reportsProducts > Stock reports > Stock value correction reportBring to the report based on search criteria those products whose stock quantity is zero but whose stock value is non-zero. Additionally, on the page, you can select the desired products and automatically create a stock value correction transaction for them. The function creates a new stock transaction row that zeroes out the stock value deviation. Thus, a correction transaction is created, the sum of which is the opposite number to the separating sum. The action does not affect the average price.
4. Make a Purchase stock transaction (or inventory entry) for the product, where the quantity of products is the actual number of products per stock and the purchase price is the desired average price (unit price field in Netvisor).
5. The new average price has been updated to the product card after these entries.

Keywords: Running average price, stock valuation, average price update

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