How stock valuation works in Office Accounting
Applies to : Office Accounting Express, Professional

Based on feedback from thousands of small businesses, the designers of Office Accounting decided to base the stock valuation on the FIFO (First-in First-out) principle.

The FIFO Principle

The idea behind the FIFO principle is pretty basic:

The stock products will be sold in the order they were purchased.
This is how it works:
  • The cost of sales for stock products sold on invoices (and cash sales) will be calculated based on the purchase price (in date order) for each product on the invoice.
  • The remaining products in stock are valued based on the later purchases.
  • Oldest products are in principle sold first
  • In the case of back-dated transactions, cost of sales is recalculated.
  • If the Adjust Stock Quantity and Value form is used, the remaining stock is re-valued at that date and the FIFO order is “reset” as if all products were sold at their current cost and re-purchased at the new value.
Example
When selling stock products, Office Accounting uses the FIFO cost for stock products on hand to deplete products from stock. For example, if you purchase five units of a product for £10.00 each and another five units of the same product for £12.00 each, Office Accounting will deplete stock for the next product you sell at rate £10.00

The Stock Valuation report contains all the financial transactions for each stock product that leads to the current stock value:

Stock valuation report