Stock movements
Purchases, sales, returns, transfers and write-offs recorded against each item and location.
All accounting & bookkeeping services
Accounting & Bookkeeping
Inventory Accounting
FinAura records your stock movements, values closing stock correctly and works out the real cost of goods sold, so your margins mean something. Stock is valued at the lower of cost and net realisable value, the books are reconciled to physical counts, and a Chartered Accountant reviews the numbers each month.
- Reviewed by Chartered Accountants
- Zoho Books and Tally Prime
- Bangalore and across India
What is covered
What Inventory Accounting Covers
From the moment stock arrives to the moment it is sold, counted or written off.
Stock valuation
Closing stock valued at the lower of cost and net realisable value, on FIFO or weighted average.
Cost of goods sold
The real cost of what was sold each month, so gross margin is a real number.
Count reconciliation
Physical counts reconciled to the books, with shortages and excesses explained.
Slow-moving stock
Ageing reports that show what is not selling, and write-downs where value has fallen.
Manufacturing costs
Raw material, work in progress and finished goods tracked through production.
How the month runs
A Month of Inventory Accounting
Stock valued at every month-end, not only in March.
Week 1
Close and value
- Closing stock valued
- Cost of goods sold
- CA review
Week 2
Record
- Purchases and returns
- Transfers between locations
- Queries in one list
Week 3
Record
- Sales and dispatches
- Production entries
- Write-offs approved
Week 4
Check
- Cycle count matched
- Ageing reviewed
- Ready to close
Your part
What We Need From You
- 01Purchase and sales documents, or system access
- 02Stock transfers and production records
- 03Physical count sheets, when counts happen
- 04Approval for write-offs
Our part
What You Get Every Month
- Stock records by item and location
- Closing stock valued correctly every month
- A real cost of goods sold and gross margin
- Count differences found and explained
- Ageing of slow-moving stock
A common question
How is closing stock valued?
At the lower of cost and net realisable value. Cost includes the purchase price and the costs of bringing stock to its present place and condition; net realisable value is what it will sell for, less the costs to sell it.
Cost is worked out on first-in-first-out or weighted average. Last-in-first-out is not allowed under the Indian accounting standards. Whichever method you use, it has to be applied consistently.
See management reportingMarginA real cost of goods sold
ValuationLower of cost and NRV
MovementsIn, out, transferred, written off
Who it is for
Businesses That Hold Stock With Us
Traders and distributors
Many items, many locations, thin margins that need watching.
Manufacturers
Raw material to finished goods, with costs tracked through production.
E-commerce sellers
Stock in your warehouse and at marketplace fulfilment centres.
Businesses with bank limits
Stock statements to the bank that hold up.
The rules, in plain English
What the Law Says
Accounting Standards
AS 2 / Ind AS 2
Inventories are measured at the lower of cost and net realisable value. Cost includes purchase, conversion and other costs of bringing stock to its present location and condition.
Official source: icai.orgAccounting Standards
Cost formulas
Cost is assigned using first-in-first-out or weighted average cost, applied consistently. Last-in-first-out is not permitted.
Official source: icai.orgCompanies Act, 2013
Section 128
A company's books must give a true and fair view, which includes stock on hand at the year-end.
Official source: mca.gov.inThis is general information, not advice for your situation; we confirm what applies to you before any work starts.
Questions we get asked
Inventory Questions, Answered
What is inventory accounting?
Recording every stock movement, valuing the stock on hand and working out the cost of goods sold, so the books show what stock you hold and what your sales really cost.
Which stock valuation methods are allowed in India?
Cost is worked out on first-in-first-out or weighted average; last-in-first-out is not allowed. Stock is then carried at the lower of that cost and net realisable value.
Can you do inventory accounting in Tally Prime?
Yes. Tally Prime handles items, godowns and batches well. Zoho Books works with Zoho Inventory. We set up and keep either.
How often should stock be counted?
At least once a year, and more often for valuable or fast-moving items. Regular cycle counts catch problems before year-end.
What happens to damaged or slow stock?
It is written down to what it can realistically be sold for, with your approval, so the books do not overstate its value.
Often Taken Together
All 10 Accounting & Bookkeeping services01Accounting & BookkeepingBookkeepingDaily or weekly recording of sales, purchases, expenses and bank entries, with every entry coded to the right ledger and GST head.02Accounting & BookkeepingMarketplace and E-Commerce AccountingAmazon, Flipkart and payment gateway settlements broken into sales, fees, returns and GST, and matched to the bank.03Accounting & BookkeepingFinancial StatementsMonthly, quarterly and annual profit and loss, balance sheet and cash-flow statements, prepared in the Schedule III format where it applies.04Accounting & BookkeepingAccounting on Zoho Books and TallyWe work in your system, or set one up for you, so your data stays yours and your team can see the books at any time.05Systems & ControlsInternal Audit & ControlsInternal audit, controls design and testing, SOP and process implementation.06Accounting & FinanceManagement Reporting & BudgetingMonthly MIS, budgets, forecasts and dashboards built from reconciled books.