Why stock needs its own step
A purchase, a sale, a transfer or an adjustment changes the quantity and value of stock. Only the purchase and the sale also post to the ledgers. So the ledgers alone do not know what your stock is worth.
The Profit and Loss and the Balance Sheet bring the stock value in themselves, from the stock entries, when you ask for it:
| Report | What to tick | What it adds |
|---|---|---|
| Profit and Loss | Include closing stock | The opening stock of the period and the closing stock, each on the ledger you named in Configuration (normally opening stock among the costs and closing stock among the income), so profit is sales and closing stock less opening stock, purchases and expenses |
| Balance Sheet | Include closing stock | The value of the stock on hand as an asset |
Without the tick, the reports show the ledgers only and the profit can look lower than it is. The next box, Include stock with zero balance, only decides whether lines whose balance is zero are listed.
Where the ledgers come from
The administrator names three ledgers in Configuration under Inventory: Opening PL stock, Closing PL stock and Closing BS stock. The reports show the stock value on these ledgers. Without them the stock line has nowhere to sit (Company settings that change buying and vouchers).
The product form also has three stock ledgers on its Inventory info tab (Open PL stock ledger, Close PL stock ledger, Close BS stock ledger). The reports do not read them: only the three in Configuration matter.
At the year end
- Finish every purchase, sale, return and transfer of the year.
- Count the stock and correct the differences with a stock adjustment dated inside the year (Count the stock and correct the differences).
- Open Stock summary for the last day and read the Balance value: this is your closing stock (Stock valuation: what your stock is worth).
- Open the Profit and Loss and the Balance Sheet with Include closing stock and compare.
- Close the year (Close a fiscal year). The closing saves the profit with and without the stock value and the closing stock figure.
The next year's opening stock on the profit and loss is the closing stock saved at the closing. The stock quantities themselves carry on from one year to the next: the year closing does not reset them.
Common questions
The profit is lower than I expect.
Tick Include closing stock. Without it the reports leave the value of stock out.
The closing stock on the profit and loss is not the figure on the stock report.
Both read the same entries but the reports run on different dates or branches, or the values were not brought up to date. Open Stock summary first, then the profit and loss (How stock is valued and what a sale costs).
We moved stock between warehouses and the closing stock changed.
A transfer that comes in at a rate different from the cost of the goods changes the total. See Move stock between warehouses with a stock transfer.
Goods sent to another branch are missing from the closing stock.
Goods on the road (a branch stock out not yet received) are in neither branch's stock reports or profit and loss closing stock. Receive them before the year end (Send stock to another branch).
Does a count difference or a write-off change the profit?
Yes: a stock adjustment changes the closing stock, and so the profit, without any ledger entry (Adjust stock: counts, damage, expiry and write-offs).