Accounting for Stock Valuation¶

For many businesses, Inventory is one of the most valuable assets, therefore managing the quantity and value of inventory is an important task.

In Viindoo software, Inventory Valuation is the configuration of the following two fields on the Product Categories:

Costing Method: A method to calculate the value of your goods.

Inventory Valuation: Record the inventory value in accounting books.

Requirements

This tutorial requires the installation of the following applications/modules:

Costing Method¶

Based on the characteristics of production and business, the business chooses to apply the appropriate method of the following four costing methods:

Standard Price¶

You need to add the price manually on each product.

When there is a price change, you must also update the price accordingly.

The value of outgoing and incoming inventories calculated at standard prices is not affected by the cost price.

Inventory value = Quantity on hand x Standard price.

Date	Operation	Quantity on hand	Input/Output value	Inventory value	Unit cost
	Opening stock	0		0	1200
07/02/2024	Buy 10 units of product A - Price per unit: 1000đ	10	+10 x 1000	10 x 1200	1200
17/02/2024	Buy 10 units of product A - Price per unit: 1500đ	10	+10 x 1500	20 x 1200	1200
20/02/2024	Sell 05 units of product A	05	-05 x 1200	15 x 1200	1200

First In First Out (FIFO)¶

The value of the outgoing stock is calculated based on the value of the first-in or the first-manufactured goods continuously until they are sold out.

Date	Operation	Quantity on hand	Input/Output value	Inventory value	Unit cost
	Opening stock	0		0	0
07/02/2024	Buy 10 units of product A - Price per unit: 1000đ	10	+10 x 1000	10 x 1000	1000
17/02/2024	Buy 10 units of product A - Price per unit: 1500đ	10	+10 x 1500	10 x 1000 + 10 x 1000	1500
20/02/2024	Sell 05 units of product A	05	-05 x 1000	05 x 1000 + 10 x 1500	1000

Average Cost (AVCO)¶

This method automatically recalculates the product price every time there is a stock receipt.

Date	Operation	Quantity on hand	Input/Output value	Inventory value	Unit cost
	Opening stock	0		0	0
07/02/2024	Buy 10 units of product A - Price per unit: 1000đ	10	+10 x 1000	10 x 1000	1000
17/02/2024	Buy 10 units of product A - Price per unit: 1500đ	10	+10 x 1500	20 x 1250	1250
20/02/2024	Sell 05 units of product A	05	-05 x 1250	15 x 1250	1250

Specific Identification¶

This method revaluates the exact product value according to the price of each product or a product lot.

For the example above, the inventory value of the product A is calculated as follows:

Date	Operation	Quantity on hand	Input/Output value	Inventory value	Unit cost
	Opening stock	0		0	0
07/02/2024	Buy 10 units of product A - Price per unit: 1000đ	10	+10 x 1000	10 x 1000	1000
17/02/2024	Buy 10 units of product A - Price per unit: 1500đ	10	+10 x 1500	10 x 1000 + 10 x 1500	1500
20/02/2024	Sell 05 units of product A (Stock input on 07/02/2024)	05	-05 x 1000	05 x 1000 + 10 x 1000	1000
22/02/2024	Sell 02 units of product A (Stock input on 17/02/2024)	02	-02 x 1500	05 x 1000 + 08 x 1500	1500

Inventory Valuation method¶

There are 2 options for recording inventory value in Viindoo software:

Manual:

The delivery orders and receipts validation does not generate journal entries.

You need to record journal entries manually when recording stock moves.

Automated:

Journal entries are automatically created when the receipts or delivery orders are validated.

For a better understanding of Viindoo software’s behavior, let’s do an example with the Average Cost (AVCO) method:

On 07/02/2024, a purchase order for 10 units of product A, 1.000 dong per unit.

On 17/02/2024, a purchase order for 10 units of product A, 1.500 dong per unit.

On 20/02/2024, a sales order for 05 units of product A, the cost of goods sold is the average cost of the 2 purchase orders above.

View the inventory valuation report, the price of product A in the storage is also calculated by averaging the cost of the 2 purchase orders and multiple by the quantity on hand.

Inventory valuation with Viindoo software¶

Configuration of Product Categories¶

Set up the inventory valuation for product A with the following information:

Product Categories Storable Product;

Costing Method: Average Cost (AVCO);

Inventory Valuation: Automated.

Configure inventory valuation on product categories in Viindoo

Configuration on Products¶

For product A, configure the General Information tab as follow:

Product Type: Storable Product;

Product Category: Storable Product.

Set up inventory valuation on a product in Viindoo

Journal entries generated from a validated receipt¶

Create a request for quotation on 07/02/2024, a Receipt button will appear on the view once this purchase order is confirmed:

Receiving products in storage location Viindoo

Press on the Receive Products button then click on Validate to complete the goods receiving.

Validate the goods receipts transfer in Viindoo

At this step, 01 journal entry will be displayed on the Receipt order.

Journal entries generated after the goods receipt is validated

Click to view detailed information on this journal entry.

Journal entries details created from the goods receipt transfer

On the product information, you will also see the updated Cost of Product A.

Similarly, you receive goods to the storage location for the order on 17/02/2024. On the product information, the cost is also updated by the software after this goods receipt.

Journal entries generated from a validated delivery order¶

Create a quotation on 20/02/2024, confirming this sales order will activate the Delivery button on the view:

Click on Delivery then press Validate to complete the goods delivery.

At this stage, 01 journal entry is generated on the delivery order.

Journal entries generated when the delivery order is validated

Click to see details, you will see the newly created journal entries that record the cost price for the stock output of Product A.

Stock output value = Quantity of stock output x Average Cost of product

Details of journal entries created from stock output

With manual inventory valuation, doing similar steps won’t generate any journal entries.

You perform the same operations for other costing methods and observe the creation of journal entries and updated costs on the product.

View Inventory Valuation reports¶

To view Inventory Valuation reports , navigate to Inventory > Reporting > Valuation.

Here is where you can find the stock quantity and inventory value of each product.

Note

You need to Activating Developer Mode (debug mode) to view the report.