1) Difficulties in detemining cost of goods sold will arises when:
a) The purchase price fluatuate over time AND
b) Not able to determine the specific item when the item is sold
2) The above 2 situation will make Navision not able to determine the exact cost of goods sold because we do not know the items sold is from which purchases. Therefore, assumption of the cost need to be made to estimate the cost of goods sold.
3) Each time a sale is make, we need to know which items have been sold and which purchase entry should be applied. The entry application can be done manually or automatically.
4) In manual application, user will chooses the exact receipt to apply to.
5) In most situation, automatic application is more feasible. This can be done based on some assumptions on how the items physically flow through inventory.