How do inventory accounting and bookkeeping work together?

When the inventory program and accounting are separate systems, stock levels and their value are synced manually or via periodic files. Any delay or manual correction creates a situation where the inventory program's quantity and the balance-sheet inventory account do not match. In a connected system, every stock movement immediately updates the corresponding ledger entry as well.

When goods are sold, their cost is written off from inventory into the cost of goods sold. The cost calculation method affects the result: FIFO (first-in-first-out) assumes the first goods bought are sold first, while weighted average calculates a single average unit cost. Saldofy supports both methods, which must be consistent throughout the financial year.

Stock-taking compares the actual stock with the recorded stock. Any difference (shortage or surplus) is posted in accounting either to expenses or to income, so that the balance-sheet inventory account reflects the real situation after the count. In a connected system, confirming the stock-take automatically creates the related journal entry.

Does a small company need inventory accounting? If you sell physical goods, inventory accounting is needed for quantities, correct cost of goods, and the balance sheet.

Can you switch between FIFO and weighted average later? The method must be consistent across the financial year; changing it affects the cost of goods and requires a deliberate decision.

How does inventory affect the balance sheet? The value of stock is an asset on the balance sheet; every stock movement changes that value.