This topic introduces the concepts related to valuation of your resale inventory in Q360. Accounting for inventory directly impacts assets reported on your balance sheet and cost of goods sold recorded on your income statement. As you sell an item from your inventory, it changes from an asset to an expense. When you return an item to your inventory through the return merchandise authorization (RMA) process, it changes from an expense to an asset.
Inventory valuation
As mentioned in the Revenue and Recognition document, Q360 assigns cost of shipped or returned equipment and materials based on the master item type (Asset or Quantity). Q360 values on-hand inventory as follows:
| Master Type | Valuation |
| A | Sum of actual purchase cost of each asset |
| Q | Sum of quantity multiplied by current average cost of all purchases related to each master |
When necessary, Q360 allows manual update of the average cost used to value on-hand inventory of a certain Q type masters. This change may increase or decrease valuation of that master depending on the new average cost.
Inventory movements
Inventory valuation increases when you receive a non-drop-shipped PO, receive an RMA, or through manual adjustments based on the outcome of a physical count.
Inventory valuation decreases when you ship items, scrap or mark an asset as missing, or perform any other manual adjustments based on the outcome of a physical count.
Transferring inventory from one branch to another does not affect valuation, even if a transfer puts items in a technician’s truck. Q360 considers a technician as a pseudo branch and will only reduce inventory valuation if a technician marks items as having been used on a service call.
Reporting and reconciliation
Q360 includes a detailed inventory report Master Valuation that breaks down valuation of on-hand inventory by branch and master, and automatically reconciles valuation of on-hand inventory such as your designated inventory asset account to a subledger. Under normal circumstances, Q360 ensures these two sides are always reconciled. However, if a discrepancy is spotted, it may indicate an underlying issue such as a manual journal entry that was posted to the controlled inventory account, which is not supported by an inventory movement tran