Stock Valuation

You can’t just magic stock out of thin air, or make stock disappear from the face of the earth without explaining yourself to your accountant - and with Pakk it’s no different! Most Stock Adjustments will imply a change in value to your total stock asset account:

• If you are disposing of broken/expired stock, for example, your stock value will go down

• If you found some stock during a stock take and need to reflect this on the system, your stock value will go up

In order to account for these value adjustments, you need to assign an ‘Allocation Account’ to your Stock Adjustment. You should create internal accounts to represent all the ‘reasons’ stock might be adjusted - this will help you track the cost (or gain) of any stock adjustments on a ‘reason by reason’ basis. Here are some suggestions for expense accounts you might want to create:

• Stocktake

• Stock damaged in transit

• Expired stock

• Stock given as sample

How Stock is Valued

When stock is created or disposed of, stock values for accounting purposes change, as explained above. How does the system know how to value stock though?

Firstly, Pakk maintains a running stock value at Lot level for all the Lots you have in stock. At any moment, you can view a Lot record and see how much of that Lot is in stock and the value of that stock.

Value is primarily established by the cost price on Purchase Orders. When receiving a Purchase Order into stock, the system will increment the value of the target Lot into which the stock is received by an amount determined by the purchase price on the Purchase Order. In other words, stock is valued at cost.

This initial valuation runs through to Stock Adjustments. When you adjust stock of a Lot that already exists, the system will work out the average value per unit of stock in that Lot and use it when valuing the adjustment. This can be thought of as ‘average cost price’ valuation. If the purchase price of each unit of stock in the Lot was the same, then the ‘average cost price’ will be identical to that actual purchase price of all the stock units. If there was variation in the purchase price as stock was received into a lot, then the ‘average cost price’ will be just that - the average price paid.

All of this is fine when Stock Adjustments are to an existing Lot. Sometimes, however, you’ll be creating a brand new Lot for a positive stock adjustment. The two primary uses cases for this are:

• Opening stock adjustment when first starting to use Pakk

• Assembly builds

In these cases, the system cannot establish a value from the existing Lot and its average cost price - it therefore falls back on the ‘Purchase Price’ of the product in question.

Before any Stock Adjustment that is going to create stock in a new Lot, it is worth checking that the purchase price on the system for that product is correct and current.

It should also be noted that the Currency used for the valuation will be the currency you choose on the Stock Adjustment, so if you need to adjust products where the system purchase prices are set in different currencies, you’ll have to create separate Stock Adjustments.