This Inventory help note is the next in a series on Financial Settings. A big chunk of your Cashflow Forecast and Balance Sheet budget is calculated for you in Calxa by using your Profit & Loss budget and the account and timing selections you make in Financial Settings.
If you manage inventory in your organisation and plan to do a Cashflow or Balance Sheet Forecast you will need to consider and budget for your inventory. This help note identifies the settings required, but you may also need to look at the Budget for Inventory (Perpetual Method) or Budget for Inventory (Periodic Method) help articles.
- To review and edit your Inventory accounts navigate to My Workspace -> Settings -> Inventory.
- First answer the question: Do you account for Inventory?
If you don't have inventory, or don't need to budget for inventory you can mark this as No and no further settings are required.
Perpetual or Periodic Inventory
There are two generally accepted principals used in accounting for inventory and they are Perpetual and Periodic. If you answered Yes to "Do you account for Inventory?" above you'll now need to indicate which accounting method you use for handling inventory.
- Select Perpetual or Periodic to indicate what accounting method you use for Inventory.
See notes below for descriptions on each method.
Perpetual Inventory Settings
Under the Perpetual accounting method Inventory and Cost of Sales are updated continuously. Stock purchases are recorded against inventory accounts in the Balance Sheet. Then, when a sale is made, this records a transactions to the Cost of Sales account.
Note: If your accounting system or some add-on manages inventory or provides a record of stock on hand, then you're likely handling inventory with the Perpetual system.
- If you use the Perpetual Inventory method select Perpetual from the drop-down.
- Which Asset accounts do you use for inventory purchases and movement?
Select all the Asset accounts that are used to record your stock levels. Under the Perpetual method you would expect to see stock purchase invoices raised against these accounts and adjustments to the accounts made automatically when you sell stock.
Periodic Inventory Settings
Purchases are recorded against a Cost of Sales account in the Profit and Loss. Periodically a journal is done to adjust the Balance Sheet to determine the correct Inventory and Cost of Sales amount.
Note: If you have accounts named Closing and Opening Stock or similar in the Cost of Sales section of your Profit and Loss, then you're likely handling inventory with the Periodic system.
- If you use the Periodic Inventory method select Periodic from the dropdown.
- Which Asset accounts do you use for inventory movements or balances?
- Which Cost of Sales accounts are used for inventory movement or balances?
Select all the Asset and Cost of Sales accounts that are used in your periodic inventory journals to adjust stock and cost of Sales.
Do not select your purchases accounts.
Budget for Inventory
In this help article we've looked at the differences between Perpetual and Periodic Inventory and how to set the required financial settings, however if you're planning to do a 3-Way, Cashflow or Balance Sheet Forecast then you'll also need to consider how to budget for inventory.
For details on budgeting for inventory please refer to these help articles:
Want to learn more? Have a look at the other help notes in the Financial Settings series: