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How do I record my Inventory on hand on my Balance sheet?

Created on  | Last modified on  Highlight Matches

Summary

How to record inventory on hand on your balance sheet in Sage Accounting

Description

Recording Inventory on Hand on your Balance Sheet if you are using a Periodic Inventory system.

Note: This step is only required if you have not activated the Advanced Inventory module in your company

Resolution

Read the below instructions or alternatively watch the step by step video below.

We will show you how to process the correct journal to bring your closing stock onto the Balance Sheet, so your current assets section looks like the example below.

In this example, we have assumed your Balance Sheet is run at 28/29 February (your financial year end):

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For clarity, the inventory values above are grouped under the heading Inventory on Hand, using the Account Reporting Groups in Sage Accounting.

How to reflect your Inventory closing balance on the Balance Sheet

Step 1 – Set up the correct accounts in sage Accounting

Step 2 – Calculate your Inventory Value movements (difference between your opening and closing inventory)

Step 3 – Process your Inventory Journal to reflect the above-mentioned movement

 

Step 1 – Create the following Inventory Accounts

In order to process your journal entry, you will need to set up some inventory accounts (if they don’t already exist).

Go to Accounts… List of Accounts… Add an Account and add the following accounts in Sage Accounting.

Note the financial categories illustrated below.

These categories are used by Sage Accounting to position the amounts in the right section of the Balance Sheet.

Accounts

Financial Category

Inventory Movement – Asset

Current Assets

Inventory Movement – Cost of Sales

Cost of Sales

 

Step 2 – Calculate the Inventory Value

Assume you began using Sage Accounting at the beginning of the current year.

You would’ve created your inventory items with their related opening balances – both quantity and value.

Sage Accounting automatically puts this balance in a System Account called Inventory Opening Balance on the Balance Sheet. In our example we will assume an opening balance total of R10,000.00.

Now we assume that at the end of the year, your total inventory on hand (closing stock) amounts to R75,000.00.

You can get this total from your Item Valuation Report.

Note: Good practice says you should conduct stock take to check your item quantities on hand as reflected on the Item Valuation Report. You should also check that the average cost value for each stock item is reasonable (in case mistakes have been made).

In our example, opening inventory totalled R10,000.00 and closing inventory totalled R75,000.00 reflecting an Inventory Movement of R65,000.00. this value is the difference between the Inventory Opening Balance and the Inventory Value (the Inventory Closing Balance). This is the amount that you will use to process your journal entry.

Inventory Opening Balance: This amount will appear on your financial statements by default.

R10,000.00

Inventory Value: your actual inventory on hand value.

R75,000.00

Inventory Movement: This amount needs to be recorded.

R65,000.00

 

Step 3 – Process the Inventory Journal Entry

Consult your accountant before processing these journal entries if you are unsure.

The journal entry will be processed to record the Inventory Movement to create the “Inventory on hand balance” as at 28/29 February as follows:

On 28/29 February debit Inventory Movement – Asset with an amount of R65,000.00 by affecting the Inventory Movement – Cost of Sales account.

To process the journal, go to Accountants Area… Process Journal Entries.

Note: If when you are processing this journal and your closing inventory value is less than your opening inventory value, reverse the debits and credits on the journal entry.

The screenshot below shows this journal entry for the example above:

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