Production Finalization
What happens when you finalize a production batch — inventory changes, WAC recalculation, and the journal entry posted.
Finalization is the action that closes a production batch and translates it into real financial and inventory data. Before finalization, a batch is a planning document — it has no effect on stock levels, no journal entry, and no impact on the cost of finished goods. After finalization, raw material inventory decreases, finished goods inventory increases, the output items' costs are set, and a journal entry is posted to the ledger.
Prerequisites for Finalization
Before clicking Finalize:
- The batch must be a Draft (a Finalized batch cannot be finalized again)
- Material lines must have quantities, and the material items must resolve an inventory account
- At least one Main or Co-Product output line must have a positive quantity, and the output items must resolve an inventory account
- Enough stock of each material must be on hand — the server refuses to consume more than is available
What Happens on Finalization
For each material line, the quantity consumed is removed from the material item's stock as a Production Input movement, valued at the rate on the line (the item's weighted average cost when the batch was created, unless you overrode it).
For each Main and Co-Product output, the quantity produced is added to stock as a Production Output movement. The per-unit cost of the output is the cost allocated to that output divided by the quantity produced.
Each output item's cost is set to the batch's cost per unit for that output.
A single journal entry is created and posted automatically, dated with the batch date. It is the same entry the Ledger Impact preview showed.
The status changes to Finalized and the banner shows the date and time. The batch stays visible with Unfinalize available.
The Finalization Journal Entry
| Account | Debit | Credit | Description |
|---|---|---|---|
| Inventory Account (each Main / Co-Product output) | Cost allocated to that output | — | Finished goods added to inventory at their share of production cost |
| Inventory Account (each material item) | — | Qty consumed × the rate on the line | Raw material stock consumed and removed from inventory |
| Expense account (each labour line) | — | Hours × rate | Labour cost transferred into finished goods cost |
| Expense account (each Variable / Fixed overhead line) | — | Absorbed amount | Overhead cost transferred into finished goods cost |
| Depreciation account (each Depreciation overhead line) | — | Absorbed amount | Asset depreciation transferred into finished goods cost |
| Inventory Account (each By-Product) | — | Qty × sell price | By-product credit against the joint cost |
The total of the debit side equals the total of the credit side — the batch page's Ledger Impact panel shows "Entries Balanced" with the DR and CR totals before you finalize.
Cost Per Unit
After finalization, the batch page shows:
| Metric | How It Is Calculated |
|---|---|
| Materials (WAC) | Sum of (quantity consumed × rate on the line) for all material lines |
| Labour | Sum of hours × rate across all labour lines |
| Fixed OH / Depreciation | Sum of absorbed amounts across the overhead lines of each type |
| Total Joint Cost | Materials + Labour + Overhead, less the by-product credit |
| Cost/Unit (each Main / Co-Product) | Cost allocated to that output divided by its quantity produced |
Effect on COGS When Finished Goods Are Sold
The cost per unit established at finalization becomes the finished goods item's cost. When those goods are later sold and dispatched on a delivery note, COGS is recognized at the item's cost at the time of dispatch — which now incorporates the cost built in during production.
This ensures that the true cost of manufacture (not just the raw material price) flows through to gross margin when the product is eventually sold.
Unfinalizing a Batch
Unfinalizing voids the finalization journal and reverses the Production Input and Production Output movements, restoring raw material stock and removing the finished goods this batch added. Any deliveries that have already consumed finished goods from this batch will have incorrect COGS after unfinalization. Before unfinalizing, check whether any finished goods from this batch have already been dispatched.
To unfinalize, open the finalized batch and click Unfinalize, then confirm. The batch returns to Draft for correction.
After correcting the actuals, click Finalize again to post a new journal with the corrected figures.