Perpetual Inventory

As per the perpetual inventory system, accounting entry is done for every stock transaction. Otherwise, it's done in larger intervals for example monthly or quarterly. Each warehouse is linked with a corresponding account head.

On receipt of items in a particular warehouse, the balance in the Warehouse Account will increase. Similarly, when items are delivered from the Warehouse, an expense will be booked, and the balance in the Warehouse Account will reduce.

How to activate perpetual inventory

Activate Perpetual Inventory:

Home > Accounting > Company > Enable Perpetual Inventory



Note that if you disable perpetual inventory, users will have to manage the account entries manually.

Set up the following default accounts for each Company if not set. These accounts are created automatically in the new OneHash accounts.

Default Inventory Account (Asset)
Stock Received But Not Billed (Liability)
Stock Adjustment Account (Expense)
Expenses Included In Valuation (Expense)
Cost Center

If the user wants to set an individual account for each warehouse, create account head for each account. Go to:

Accounts > Chart of Accounts > Company > Application of Funds (Assets) > Current Asset > Stock Assets > Create a new account with same name as Warehouse

Now, go to a warehouse and link this account to the warehouse. This helps in filtering and viewing statements warehouse-wise.

For stock transactions, general ledger entries made against the Account Head set on the warehouse, if the user had not set the account for the warehouse then the system gets the account head from the parent warehouse. If Account was not set for parent warehouse then the system gets the account(Default Inventory Account) from the company master.

Example

Consider the following Chart of Accounts and Warehouse setup for your company:

Chart of Accounts:

Assets (Dr):

Current Assets
- Accounts Receivable > Debtors
- Stock Assets > stores, finished goods, work in progress
- Tax Assets > VAT

Liabilities

Current Liabilities
- Accounts Payable > Creditors
- Stock Liabilities > Stock received but not billed
- Tax Liabilities > Service Tax

Income (Cr)
Direct Income
- Sales Account

Expenses (Dr)
Direct Expenses
- Stock Expenses > Cost of Goods Sold, Expenses included in valuation, Stock adjustment

Indirect Expenses
- Shipping Charges
- Customs Duty

Warehouse - Account Configuration

Stores
Work In Progress
Finished Goods

Purchase Receipt

Suppose you have purchased 10 nos of item "RM0001" at $200 and 5 nos of item "Base Plate" at $100 from supplier "Arcu Vel Quam Fabricators". Following are the details of Purchase Receipt:

Supplier: Arcu Vel Quam Fabricators

Items:



Taxes:



Stock Ledger:



General Ledger:



As stock balance increases through Purchase Receipt, "Store" accounts are debited and a temporary account "Stock Receipt But Not Billed" account is credited, to maintain double-entry accounting system. At the same time, the negative expense is booked in account head having category as "Valuation" or "Total and Valuation" in taxes and charges table for the amount added for valuation purpose, to avoid double expense booking.

Purchase Invoice

On receiving Bill from supplier, for the above Purchase Receipt, you will make Purchase Invoice for the same. The general ledger entries are as follows:

General Ledger:



Here "Stock Received But Not Billed" account is debited and nullified the effect of Purchase Receipt.

Delivery Note

Let's say, you have an order from "Utah Automation Services" to deliver 5 nos of item "RM0001" at $300. Following are the details of Delivery Note:

Customer: Utah Automation Services

Items:



Taxes:



Stock Ledger



General Ledger



As an item is delivered from "Stores" warehouse, "Stores" account is credited and an equal amount is debited to the expense account "Cost of Goods Sold". The debit/credit amount is equal to the total valuation amount (buying cost) of the selling items. And the valuation amount is calculated based on your preferred valuation method (FIFO / Moving Average) or actual cost of serialized items.



Sales Invoice with Update Stock

Let's say, you did not make Delivery Note against the above order and instead, you have made Sales Invoice directly, with "Update Stock" options. The details of the Sales Invoice are same as the above Delivery Note.

Stock Ledger



General Ledger



Here, apart from normal account entries for an invoice, "Stores" and "Cost of Goods Sold" accounts are also affected based on the valuation amount.

Stock Entry (Material Receipt)

Items:



Stock Ledger



General Ledger



Stock Entry (Material Issue)

Items:



Stock Ledger



General Ledger



Stock Entry (Material Transfer)

Items:



Stock Ledger



General Ledger

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