Production: from the bill of material to finished goods

Q: We made some goods outside Penahak's production screens. How do they come into stock?

With a Stock adjustment and the reason Finished goods receive , at the rate they cost you. It moves stock only, like production itself ( Adjust stock: counts, damage, expiry and write-offs ).

Production turns raw materials into finished goods in three documents: a Bill of Material (the recipe), a Production Order (the plan) and a Production Journal (what was actually made). Stock moves only when the journal is approved, at the quality check. Nothing is posted to the ledgers.

Accounting Production
3 min read
Updated October 20, 2026

For Production staff Store keeper Owner or manager Accountant

On this page

The three documents
What production does to stock
Before you start
Reports
Common questions

The three documents

Step	Document	What it holds	Moves stock?
1	Bill of material (BOM)	The recipe: the finished product and the quantity it makes, the raw materials, the fixed costs and the by-products	No
2	Production order	A plan: make this many of the product from this BOM	No
3	Production journal	What you actually made: the quantities, machine, costs	Only when approved

Each of the three is approved before the next can use it: a production order is made from an approved, unlocked BOM; a production journal is made from an approved production order. The journal's own approval is the quality check: you say how many units passed, and the stock moves.

Write the recipe
Who
Production manager
Where
Bill of material > Add
What changes
The finished product, its quantity, the raw materials with their warehouses and quantities, fixed costs and by-products. Approve it (Bill of material).
Plan the run
Who
Production manager
Where
Production order > Add
What changes
Choose the BOM, the quantity, the warehouse and the contractor. Approve it (Production order).
Record the production
Who
Production staff
Where
Production journal > Add
What changes
Choose the order. The raw materials come in with their current cost. Enter the quantity produced, the machine and the cost centre (Production journal: record production and approve it).
Check the quality and approve
Who
Production manager
Where
The journal's page > Approve
What changes
Enter the approved and rejected quantities. The raw materials leave their warehouses and the approved finished goods come in.

What production does to stock

At the journal's approval:

the raw materials go out of their warehouses (their stock value leaves first in, first out, like any goods that go out);
the finished goods come in to the journal's warehouse: the approved quantity, valued at the cost the journal worked out when it was saved (raw materials at their average cost, plus fixed costs, less by-products) shared over the quantity produced;
the by-products come in at the value you gave them.

The rejected quantity does not come into stock: its cost is lost from the stock value. See What production changes in stock and in the books.

Before you start

Production needs set-up: approval for the BOM and the production order, numbering series, cost centres, machines, and the products and their stages (Set up production). Without approval switched on and an approver, a BOM stays Unapproved and cannot be used.

Reports

Five reports cover production: the bills of material, the journals, the finished goods costing, the quality-pass details and the raw material consumption (Production reports).

Common questions

Can we record production without a production order?

No. A production journal is made from an approved production order, and the order from an approved bill of material. Set up the bill of material once; after that each run needs only an order and a journal (Production order).

We made some goods outside Penahak's production screens. How do they come into stock?

With a Stock adjustment and the reason Finished goods receive, at the rate they cost you. It moves stock only, like production itself (Adjust stock: counts, damage, expiry and write-offs).