How to Revalue an Entire Cost Layer in Business Central
- Ken Sebahar
- Nov 19
- 8 min read
The Item Revaluation Journal within Microsoft Dynamics 365 Business Central is designed specifically to change the unit cost (or "value") assigned to inventory Items. This feature provides two options for revaluing inventory:
1) Revaluing the current on-hand quantity for an Item
2) Revaluing an entire cost layer for an Item (regardless of whether or not the quantity remains in on-hand inventory).
One very common misconception is that the Item Revaluation Journal can only be used to revalue the current quantity on-hand for an Item. For example, if 500 EA were purchased and currently only 400 EA remain in on-hand inventory, the assumption is that the Item Revaluation Journal can only be used to update the 400 EA remaining in on-hand inventory, but not the entire cost layer of 500 EA. But you can value the entire 500 EA!
One of the primary reasons this misconception exists is that even Microsoft doesn't mention this second option in any of the Microsoft Learn or e-learning content. This link below is the Microsoft Learn page where Microsoft describes the functionality available on the Item Revaluation Journal page: Create new value entries for items in the inventory - Business Central | Microsoft Learn
Below we will walk through how to revalue the full quantity of an Item Ledger Entry regardless of the quantity that remains as on-hand inventory. I will also share the potential limitations that may be encountered when attempting to do so, why these limitations exist, and how to proceed.
Assumptions and System Setup
Before we get started, let's review our current system setups and the Items we will use to demonstrate both revaluation methods.
Inventory Setup
With "Automatic Cost Posting" enabled and the "Automatic Cost Adjustment" field set to Always on the Inventory Setup page, we are set up to perform full cost adjustments in real-time as Item-related entries are posted:
Inventory Periods and Allowable G/L Posting Dates
Next, let's review the allowable Posting Date ranges and the status of the Inventory Periods, as this is very important when revaluing inventory.
We will be completing these valuation adjustments as of November 14, 2025.
The General Ledger Setup page is as follows - with no posting allowed prior to October 1, 2025 (or after December 31, 2025):
Inventory Periods have been set up and are regularly closed as part of each month-end process. The closing of Inventory Periods prevents entries from being posted to the period. In our example, all periods through September 30, 2025 have been closed:
Note: if you use Items and do not have Inventory Periods set up, you should set them up immediately and begin closing the Inventory Periods as part of your month-end procedures. Note that when you close an Inventory Period, all previous periods are also automatically closed, so there is no need to close each historical period individually.
For more information on setup, closing, and reopening of Inventory Periods, please refer to this Microsoft Learn page: Work with inventory periods - Business Central | Microsoft Learn
Item Setup
For this example, we will use two existing Items, each with a Costing Method of FIFO:
To keep things simple, each of these Items has a single "Purchase" Item Ledger Entry for 500 LB, and then a single application posted to reduce the on-hand quantity from 500 (as you can see from the "Quantity on Hand" shown above).
The screenshots below show all existing Item Ledger Entries for each of these two Items:
Revaluing the remaining on-hand quantity of inventory
Let's first review the steps for revaluing the current on-hand quantity of an Item in inventory. This is the first option mentioned above.
This option is useful for commodity type items where inventory may be required to be revalued at a "lower of cost or market" or other revaluation method based on local accounting and financial reporting rules. Examples of these types of Items could be items such as sugar, oil, steel, or other precious metals.
To begin this revaluation process, open the Item Revaluation Journal page and select "Calculate Inventory Value":
A filtering tab exists where you can choose a specific Item to revalue. You can also filter this process using a Location filter or other Item field such as Item Category Code.
Running this process for the two Items shown above creates the following new lines in the Item Revaluation Journal:
It is possible that the "Quantity" displayed is made up of multiple Item Ledger Entries. For example the 400 LB of Item No. 1123 may have been received on 2 or 3 different Purchase Order Receipts. Using this revaluation option, the system will revalue all appropriate Item Ledger Entries based on the new unit cost as defined by the user in the "Unit Cost (Revalued)" on each line.
Revaluing an entire cost layer of inventory
There are other times when the goal is not to adjust the current on-hand quantity of an Item, but instead to adjust an inaccurate Unit Cost applied to an entire cost layer (or Item Ledger Entry). A simple example of this would be when a user creates and posts a "Positive Adjustment" using the Item Journal and assigns an inaccurate "Unit Cost". (Note: When a "Positive Adjustment" entry is made, the system will default the "Unit Cost" on the line to the current average cost of the Item, which may not be accurate. Additionally, the user has the ability to manually update this "Unit Cost" field when entering a "Positive Adjustment", and they may have entered an inaccurate value.)
Instead of using the "Calculate Inventory Value" feature, we will instead manually create the Item Revaluation Journal line as follows:
Enter the Item No. on the line.
Use the AssistButton on the "Applies-to Entry" field to manually choose the specific Item Ledger Entry (or cost layer) to be adjusted.
Enter the "Unit Cost (Revalued)" which represents the new Unit Cost value.
Once this "Purchase" entry has been selected, many of the fields on the Item Revaluation Journal line are automatically populated:
You will notice that several of the fields are not editable including Posting Date, Location Code, and Quantity. This is because the system needs to revalue the entry using these same field values that existed on the Item Ledger Entry record.
Prior to posting the entry, a "Document No." will need to be assigned and the "Unit Cost (Revalued)" will need to be set to calculate the adjustment "Amount". This next screenshot shows the same line as above after all fields have been properly populated.
Using the "Preview Posting" feature, we can see below that the entire 500 EA on the original Item Ledger Entry will be revalued. In this example, the system (specifically the "Adjust Cost - Item Entries" process) will generate multiple entries: one entry to adjust the remaining on-hand inventory quantity, and additional entries to update the Unit Cost associated with the quantities that have already been sold, consumed, or otherwise are not part of the current on-hand quantity. In this example, we only have a single "Negative Adjustment" applied to the cost layer, so we have a total of two new Value Entries to be created upon posting:
Note: for more information on how the "Adjust Cost - Item Entries" process works, refer to this previous article on Speaking Business Central: Adjust Cost – Item Entries: What it is and Why You Need It for Accurate Costing and Inventory Valuation
It is important to note that the user does not have any control on the Posting Date applied to these entries. As you can see from the above entries, the Posting Date will be automatically set to match the original date of the related entry being adjusted.
But what if Item Ledger Entries from previously closed Accounting/Inventory periods need to be adjusted? Let's see!
First, let's close the October 2025 Inventory Period:
After the Inventory Period has been successfully closed:
Next, since we have closed the Inventory Period through 10/31/2025, let's also update the allowable Posting Date range on the General Ledger Setup page to ensure that users do not attempt to post entries into a closed period:
Note: these same fields exist on the User Setup page. If records exist for users on the User Setup page and the "Allow Posting From" or "Allow Posting To" dates have been populated on these records, then the User Setup dates will be applied when posting. If there is no User Setup record for the user or if the date fields are blank, then the General Ledger Setup dates are used.
Now let's attempt to repeat the same process as above for Item No. 1124 and see what happens.
When selecting "Post" or "Preview Posting", the following message is displayed:
This message is due to the current "Allow Posting From" date on the General Ledger Setup page. Specifically, the system is attempting to revalue the Item Ledger Entry using the original October 5, 2025 Posting Date, but the user does not have access to post entries to that date.
For more information on allowable Posting Date in conjunction with the "Adjust Cost - Item Entries" process, please refer to this Microsoft Learn page: Error Message "Posting Date is not within your range of allowed posting dates" - Business Central | Microsoft Learn
So what if we manually update the "Allow Posting From" date back to October 1, 2025?
Then, this message will be displayed:
As this message indicates, in order to post this revaluation, the Inventory Period would need to be reopened in order to post this entry.
So does this mean that you can never revalue an entire cost layer from a closed period?
No, however, these are excellent controls that ensure that unauthorized users are not posting entries into periods that have previously been closed and should no longer be adjusted. This is important because the financial results for the period may have already been reported and no further changes to these closed periods are allowed.
However, depending on the circumstance, you may decide that reopening the period and making this adjustment is warranted, and the system fully allows for this scenario by reopening the Inventory Period and adjusting your "Allow Posting From" date. Just be aware that your balance sheet and/or income statement from the prior period(s) will be impacted - and remember to re-close your Inventory Period(s) and update your "Allow Posting From" date after you have posted your Item Revaluation Entries.
The important takeaway here is that YOU get to decide when an entry from a previously closed period can be adjusted and when an alternative method should be used to adjust the value of the inventory.
Summary
Business Central provides both the ability to update the current remaining on-hand inventory for an Item and the ability to update an entire cost layer. If some units in the cost layer have been sold, the "Adjust Cost - Item Entries" process will generate additional Value Entry records so that the cost and profitability associated with these application entries reflects the new valuation of the Item. While there are controls in place to potentially limit the ability to revalue a full cost layer, there is never a point in time when Business Central will prevent this type of adjustment from being completed.