Reconcile Inventory to General Ledger in Business CentralReconciling Inventory to General Ledger in Microsoft Dynamics Business Central involves meticulous attention to detail. To ensure accuracy, finance and accounting departments must cross-reference inventory values with General Ledger accounts regularly. By generating detailed reports and comparing them consistently, discrepancies can be promptly identified and rectified. This process guarantees that the inventory value stays aligned with the General Ledger, maintaining financial integrity within the system. By following these steps diligently, businesses can uphold precise inventory accounting practices in Microsoft Dynamics Business Central.

Accurate inventory valuation is critical for maintaining the integrity of your financial statements. However, discrepancies between the inventory subledger and the General Ledger (G/L) can lead to costly errors, compliance issues, and operational inefficiencies. For finance and accounting teams using Microsoft Dynamics 365 Business Central, reconciling inventory value to G/L accounts is a straightforward process—if you know which tools to use and what to look for.

In this blog, we’ll walk you through:

Why Inventory Reconciliation Matters
Key Reports to Use in Business Central
Common Causes of Discrepancies
Steps to Reconcile Inventory Value to G/L
Best Practices to Prevent Future Imbalances

Why Inventory Reconciliation Matters

Inventory is often one of the largest assets on a company’s balance sheet. When the inventory value in the subledger (item ledger) doesn’t match the G/L inventory account, it can:

Skew financial statements, leading to inaccurate reporting.
Trigger audit red flags and compliance issues.
Mask underlying operational problems (e.g., theft, data entry errors).

Regular reconciliation ensures that your financial records are accurate, compliant, and reflective of your actual inventory position.

Key Reports to Use in Business Central

Business
Central provides powerful tools to help finance teams reconcile
inventory value to G/L accounts. Here are the key reports to use:

1. Inventory to G/L Reconciliation Report

Purpose: Compares the inventory valuation from the item ledger (subledger) with the G/L inventory account.
How to Access: Go to Inventory > Reports > Inventory to G/L Reconciliation.
What to Look For:
- Column A: Inventory valuation from item ledger entries.
- Column B: G/L balance for the inventory account.
- Column C: Difference (A – B).
Action: Investigate any non-zero differences.

2. Inventory Valuation Report

Purpose: Provides a detailed breakdown of inventory value by item, location, or date.
How to Access: Go to Inventory > Reports > Inventory Valuation.
What to Look For:
- Items with unexpected values (e.g., negative stock, unusually high/low costs).
- Discrepancies between physical stock and system stock.

3. Item Ledger Entries and Value Entries

Purpose: Drill down into individual transactions to identify discrepancies.
How to Access: Go to Inventory > History > Item Ledger Entries or Value Entries.
What to Look For:
- Unposted transactions (e.g., purchase invoices, sales shipments).
- Incorrect cost adjustments or revaluations.

4. G/L Register and G/L Entries

Purpose: Review manual entries posted directly to the G/L inventory account.
How to Access: Go to General Ledger > History > G/L Register or G/L Entries.
What to Look For:
- Manual entries that bypassed the inventory subledger.
- Incorrect postings to the inventory account.

Common Causes of Discrepancies

Here are the most common reasons why inventory value might go out of balance with the G/L:

1. Unposted Transactions
Example: Unposted purchase invoices, sales shipments, or inventory adjustments.
Solution: Post missing transactions and run Adjust Cost – Item Entries.

2. Manual G/L Entries

Example: Someone manually posted to the G/L inventory account without updating the item ledger.
Solution: Identify and reverse manual entries.

3. Incorrect Posting Groups

Example: Items or transactions posted to the wrong G/L accounts due to misconfigured Inventory Posting Groups.
Solution: Review and update Inventory Posting Setup.

4. Open Inventory Periods

Example: Transactions posted to a prior period that wasn’t closed.
Solution: Close all prior periods in Inventory > Setup > Inventory Periods.

5. Costing Issues

Example: Purchase invoices or production orders not fully costed.
Solution: Run Adjust Cost – Item Entries to update costs.

Steps to Reconcile Inventory Value to G/L

Step 1: Run the Inventory to G/L Reconciliation Report

Set the date range to the period you’re reconciling (e.g., month-end).
Compare the inventory valuation (Column A) with the G/L balance (Column B).

Step 2: Investigate Differences

Use the Item Ledger Entries and Value Entries to drill down into discrepancies.
Check for unposted transactions, manual G/L entries, or incorrect posting groups.

Step 3: Post Missing Transactions

Post any unposted purchase invoices, sales shipments, or adjustments.

Step 4: Adjust Costs

Run Adjust Cost – Item Entries to ensure all costs are updated.

Step 5: Close Inventory Periods

Go to Inventory > Setup > Inventory Periods and close all prior periods.

Step 6: Re-run Reports

Re-run the Inventory to G/L Reconciliation Report to verify the difference is resolved.

Best Practices to Prevent Future Imbalances

Automate Cost Adjustments:
Schedule Adjust Cost – Item Entries using the Job Queue to ensure costs are always up to date.

Regular Reconciliation

Make the Inventory to G/L Reconciliation Report part of your month-end closing process.

Train Your Team

Ensure your team understands proper inventory posting and reconciliation procedures.

Lock Periods

Close inventory periods promptly to prevent backdated transactions.

Monitor Key Metrics

Use Power BI dashboards to track inventory accuracy, turnover, and valuation trends.