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Stock valuation
The valuation method decides the rate at which an item's closing stock — and the cost of what you sold — is worked out. It drives the closing stock in the Balance Sheet and your gross profit. Each item has its own method.
The methods
| Method | How it values stock |
|---|---|
| Weighted Average (the default) | At the average cost of what you hold. Smooths out price changes. |
| FIFO | First in, first out: the oldest stock is treated as sold first, so what remains is valued at the latest purchase rates. |
| Last Purchase Cost | Everything on hand at the most recent purchase rate. Simple and always current. |
| Standard Cost | At a fixed cost you set on the item. The difference from actual cost is a variance. |
RuleStandard Cost needs a standard cost greater than zero on the item.
Change an item's method
Changing how stock is valued is a change in accounting policy, so it is done deliberately, not by editing the item.
- List of Masters → Stock Items, select the item, click Valuation.
- Choose the new method and the date it applies from (it starts at the beginning of the open financial year), and type the reason. A preview shows how the item’s stock value would change.
RuleOnly an Owner or Accountant can change a valuation method, and a reason is required. The change applies from its date onward: periods before it keep the method they were reported under, and an audited period cannot be changed.