Brightpearl handles all your accounting entries for you as you add and remove inventory.
Types of Inventory Accounting
There are two different methods of accounting for inventory, "Cost of Sales" and "Periodic".
Cost of Sales accounting means that your inventory/asset account is decreased for every sale shipped, with the value of inventory being added to the Sales Invoice accounting transaction as a "cost of sale". Items are removed from inventory using First-In-First-Out (FIFO), with the actual price you paid for the item being marked up against the sale that it was allocated to. This allows for fine reporting of profitability, between any dates without the need to enter opening and closing stock balances for each period.
Periodic accounting does not create accounting entries for assets on a per sale basis, so you need to do a stock take at the end of each period (usually a month) to determine whether you have increased or decreased your asset value. The difference between the periods is then entered as a manual journal to record opening and closing inventory values, the difference being the Cost of Sales during the period.
Once you've started your accounting, changing between inventory accounting methods requires close support from your accountant.
Select your prefered method in Setup > Company > Accounting: Nominals.
A Guide to First-in-First-Out
Each stock item purchased has a value, and this value may vary between Purchase Orders so items are tracked by the date they arrive. The oldest items are sold first (First In First Out - FIFO). So say for example you have purchased 10 items at £10.00, then purchase another 5 of the same item at £15.00.
Your stock database will show:
1st Jan : 10 x Item @ £10.00 = £100.00
5th Jan : 5 x Item @ £15.00 = £75.00
Total stock value is £175.00, Last price paid is £15.00
If you then sell 12 items, all 10 of the first delivery will be removed, along with 2 of the second delivery (first in first out). The total value removed from stock is:
10 x £10.00 = £100.00
+ 2 x £15.00 = £30.00
Total £130.00
This is the Cost of Sale, which is applied to the accounting database for this sale of 12 items.
Using Cost of Sales Accounting
General Ledger Movements for the PURCHASE of stock
Create purchase order: Generates no accounting entries
Receive Stock:
Receive Invoice:
General Ledger Movements for the SALE of stock
Create Sales Order: Generates no accounting entries
Create Invoice:
Fulfil/Ship Order:
Using Periodic Accounting
General Ledger Movements for the PURCHASE of stock
Create purchase order: Generates no accounting entries
Receive Stock:
Receive Invoice:
General Ledger Movements for the SALE of stock
Create Sales Order: Generates no accounting entries
Create Invoice:
When you are not using cost of sales accounting no accounting entries are made for stock. This means you will be required to post a journal to update the stock value. You may choose to do this monthly, or more frequently.
MANUAL Stock Journal:
Returns to Supplier
When you raise a Purchase Credit for items, you must manually enter the details of the items. When the Purchase Credit is credited the following accounting is generated:
In order to correct your stock you will to do a manual stock adjustment:
Returns from Customers
Receiving goods back into your inventory will increase the asset value, in the same way as it does for Purchase Orders. The value added back into your accounts is the value taken from the cost price list on the Sales Credit, which allows you to refund your customer at £10.00 but receive assets (inventory) back into stock at £2.50 for example. Remember that assets are always valued excluding tax.
Stock Corrections
When you add inventory using the corrections screen, you need to choose an asset value. This is added (debited) to the nominal code as defined in the product settings for the item you're adding. The balancing part of the transaction is recorded in the nominal account you choose for "stock correction (remove)" at Setup > Company > Accounting: Nominals.
When removing inventory, the value is removed (credited) from the asset account linked to the product, with the balance going to the "stock correction (add)" code of your choice.
Transfers Between Warehouses
Asset values are not affected when you transfer items between warehouse, or when you move items within a warehouse.
Stock Reports
There are two key reports available for monitoring your stock value:
Inventory Detail report - This report lists each of your products once for every different cost price (purchase price); displaying the quantity and value for the product at each cost price.
For example, if you purchased 10 items at £10.00, then purchased another 5 of the same item at £15.00, this report will display 2 lines; 10 with a price of £10.00 and total value of £100.00, and 5 at a price of £15.00 with a total value of £75.00.
It is possible to amend your inventory value from this report. Click the edit pencil next to a cost price. You should only so this if you are sure of what you are doing. It may need to be done if items were mistakenly received on a purchase order at an incorrect price. This won't alter the price on the purchase order itself.
Inventory Summary report - This report lists each of your products once; displaying the total quantity and the total combined value from all locations and for all costs.
Using the same example of 10 items at £10.00 and 5 of the same item at £15.00, this report will display only one line with the combined quantity and value; 15 items worth £175.00.
