In perpetual inventory, system creates accounting entries for each stock transactions, so that stock and account balance will always remain same. The account balance will be posted against their respective account heads for each Warehouse. On saving of a Warehouse, the system will automatically create an account head with the same name as warehouse. As account balance is maintained for each Warehouse, you should create Warehouses, based on the type of items (Current / Fixed Assets) it stores.
At the time of items received in a particular warehouse, the balance of asset account (linked to that warehouse) will be increased. Similarly when you deliver some items from that warehouse, an expense will be booked and the asset account will be reduced, based on the valuation amount of those items.
2. In perpetual inventory, the system will maintain seperate account balance for each warehouse under separate account head. To create that account head, enter "Create Account Under" in Warehouse master.
Suppose you have purchased *10 nos* of item "RM0001" at *$200* and *5 nos* of item "Desktop" at **$100** from supplier "East Wind Inc". Following are the details of Purchase Receipt:
As stock balance increases through Purchase Receipt, "Store" and "Fixed Asset Warehouse" accounts are debited and a temporary account "Stock Receipt But Not Billed" account is credited, to maintain double entry accounting system.
On receiving Bill from supplier, for the above Purchase Receipt, you will make Purchase Invoice for the same. The general ledger entries are as follows:
Here "Stock Received But Not Billed" account is debited and nullified the effect of Purchase Receipt. "Expenses Included In Valuation" account has been credited which ensures the valuation expense accounts are not booked (debited) twice (in Purchase Invoice and Delivery Note).
As item is delivered from "Stores" warehouse, "Stores" account is credited and equal amount is debited to the expense account "Cost of Goods Sold". The debit/credit amount is equal to the total valuation amount (buying cost) of the selling items. And valuation amount is calculated based on your prefferred valuation method (FIFO / Moving Average) or actual cost of serialized items.
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In this example, we have considered valuation method as FIFO.
Valuation Rate = Purchase Rate + Charges Included in Valuation
Lets say, you did not make Delivery Note against the above order and instead you have made Sales Invoice directly, with "Update Stock" options. The details of the Sales Invoice are same as the above Delivery Note.
