All about stock valuation and your general ledger
Contents
The basics concepts of stock value
What's the difference between a stock and non-stock item?
The value of stock items in the inventory system
Viewing your current stock value
Stock value and the general ledger
Stock on hand accounts in the general ledger
Viewing your stock on hand accounts
Reconciling stock valuation to your general ledger
Comparing your general ledger and stock valuation
Correcting your stock valuation reconciliation
The basics concepts of stock value
What's the difference between a stock and non-stock item?
A stock item is any item whose Item type is set to Stock. These items have their quantities and values tracked in the inventory system, and their total value contributes to your stock valuation. These are what you would typically consider to be your "inventory".
A non-stock item is any item whose Item type is set to Non-stock. These are the items whose quantities and values are not tracked. They typically represent intangible items (such as services, labour, or miscellaneous fees) or items where tracking would be unnecessary or a waste of administrative time (such as stationery, or other sundry supplies).
When you purchase non-stock items, they are generally considered an expense or a cost of sale.
The value of stock items in the inventory system
The inventory system is everything contained under the Inventory menu in Accentis Enterprise.
The total value of everything that exists in stock at a single point in time is called your stock valuation. As you buy more stock and put it on the shelf, your stock valuation goes up. As you consume stock, your stock valuation goes down.
Importantly, non-stock items never form part of your inventory valuation. While you can see how much you have spent on them or what their purchase prices were, they never have a quantity or value at any point in time in your inventory and so do not contribute to your total stock value.
Viewing your current stock value
Reports such as SA3548 - Valuation details (by item / warehouse) show the total value of your stock items. They can be used to see your current stock valuation or historical stock information as at specified dates.
Stock value and the general ledger
Stock on hand accounts in the general ledger
The Accentis Enterprise General ledger module has accounts dedicated to holding the value of your inventory from a financial perspective. These are called your stock on hand accounts.
Each stock item is linked to one Stock account per warehouse. This lets you use different stock on hand accounts for each warehouse, making it easier to view their values separately if needed.
This linkage is recorded on the Warehouses tab > Accounts tab of the Inventory form.
Each stock item is linked to a general ledger account for each warehouse so that inventory movements are reflected in your financial records. When the quantity or value of a stock item changes in the inventory system, the same value is also posted to the item’s linked general ledger account. This keeps a financial record of your inventory value in the general ledger.
From the point of view of your general ledger, stock on hand accounts should only be used to record the inventory value of your stock items. Using them for other purpose can cause discrepancies between the values in your inventory system and general ledger.
Viewing your stock on hand accounts
To see the stock on hand value in your general ledger, you will typically have a stock on hand group (or parent) account and individual sub-accounts representing the stock valuations for different types of products that you have on hand.
There are no set rules about how many accounts to have, what they should be called, or how to allocate stock items to different accounts.
Reconciling stock valuation to your general ledger
When all is done correctly, the total value of all your general ledger stock on hand accounts should always equal the total value of everything that you have in stock.
Accentis Enterprise grants users the flexibility to be able to configure their system in a variety of ways – but with that flexibility, comes the responsibility to manage the data correctly.
Checking, or reconciling, these values is one of the most basic checks done regularly in any financials and stock management system.
Comparing your general ledger and stock valuation
The best report to use to show the value of everything you have in stock in comparison to the general ledger is SA1493 - Valuation reconciliation (by G/L account, retrospective).
This report shows every account code that is linked to a stock item, and the total value of all items that are linked to those accounts.
Checking that the sum totals of the Stock value as at date column and A/C bal as at date column match confirms that there are no discrepancies between your general ledger and inventory values.
Reasons for discrepancies
There are three main reasons discrepancies between your stock on hand account values and inventory value may occur.
- You have stock items that aren't linked to stock on hand accounts;
- You have non-stock items that are linked to stock on hand accounts; or
- You have non-inventory transactions that modify the value of stock on hand accounts.
Stock items not linked to stock on hand accounts
When a stock item is added to or removed from stock, such as through a dispatch, receipt, or work order, both its inventory value and the value of its linked account are updated accordingly.
If that stock item is linked to an account that isn't a stock on hand account, then, although the value of the linked account will change, the total value of your stock on hand accounts will not.
Effects on reconciliation:
- Stock valuation will change.
- Stock on hand account values will not change.
Some reports, including SA1493 - Valuation reconciliation (by G/L account, retrospective), show the account balances of every account linked to stock items.
This means that if you have an item linked to an account other than a stock on hand account, the entire value of that account will be displayed and compared to your inventory valuation, potentially making discrepancies appear much larger than they actually are.
Non-stock items linked to stock on hand accounts
When a non-stock item is used in a transaction, the value of its linked account changes, but there is no change to your total inventory value.
If that item is linked to a stock on hand account, the value of that account will change in the general ledger without a corresponding change in the inventory system.
Effects on reconciliation:
- Stock valuation will not change.
- Stock on hand account values will change.
Non-inventory transactions to your stock on hand accounts
Any transactions that are posted to a stock on hand account will change the value of that account. If these transactions don't come from the inventory module, there will be no corresponding change to the total value of your stock.
Effects on reconciliation:
- Stock valuation will not change.
- Stock on hand account value will change.
Preventing discrepancies
The best way to stop reconciliation issues is to make sure they aren't happening in the first place.
Most discrepancies come from items that are linked to incorrect general ledger accounts (see Reasons for discrepancies for more information). Therefore, the best way to prevent discrepancies is to make sure your item accounts are linked correctly.
This is done by:
- Configuring Inventory G/L account management to assign accounts automatically; and
- Checking which accounts are assigned to your items.
Setting up inventory G/L account rules
The first step to preventing reconciliation issues is to setup rules for your items so that they have their accounts linked automatically.
From the Inventory G/L account management form, you can configure rules to assign accounts automatically based on a combination of warehouse, product group, and item type.
For example, you can setup rules so that stock items are assigned a stock on hand account specific to the warehouse they are stocked in. Or you can setup rules so that all non-stock items in a "Freight costs" product group are linked to the same expense account.
The important part is, if any account configuration rules apply to an item, that item's accounts are locked and can't be changed manually. Existing rules can be changed or deleted, or more specific rules can be created, but the accounts can't be modified from the item record directly.
Checking your current account linkings
There are two main methods of checking your current account linkings for issues depending on the information you are wanting to see. You can either:
- Use SA2019 - Listing with account codes to view every item and their linkings; or
- Use SA4443 - System data health check to view alerts for items with potentially incorrect accounts.
Viewing your account linkings
To make sure all your items have the correct accounts linked, you don't have to go to each item and check each warehouse individually. You can see them all in one place and check them at the same time.
SA2019 - Listing with account codes allows you to view a complete list of your items and their Stock / Expense account.
You can filter this down to only show specific items codes, product groups, warehouses, or item types. You can even filter to only show items linked to specific accounts.
Viewing account alerts
The SA4443 - System data health check report runs a series of checks on your database to show potential issues with your setup/configuration.
The two checks we are interested in are:
- 634 - Stock item's STOCK account is not an asset account type.
- Because we know that stock item's should always be assigned to a stock on hand account, and that all stock on hand accounts are asset accounts, Accentis Enterprise will flag any stock items that aren't assigned to asset accounts.
- 639 - Non-stock items using another item's stock account.
- Because we know that stock item's should always be assigned to a stock on hand account, and that non-stock items should never be assigned to a stock on hand account, Accentis Enterprise will flag any non-stock items that are assigned to the same account as a stock item.
If either check shows any issues, you can click on the hyperlinked Status column to quickly view a complete list of the affected items.
Locating discrepancies
Checking the current balance
- Run SA1493 and set the Show stock valuation for all stock as at filter to the current date.
- If the Difference column is 0, then your stock valuation reconciles to the general ledger, and no further action is required.
- If the Difference column is not 0, then you need to identify when the discrepancy occurred. Follow the process in Checking the previous financial year balance.
Checking the previous financial year balance
- Set the Show stock valuation for all stock as at filter to the end of the financial year before the current database’s financial year, then refresh the report. For example, if your current database is in the 2025/2026 financial year, set this date to 30/06/2025.
- If it does reconcile with the general ledger, the discrepancy must have occurred in the current database's financial year. Follow the process in Identifying when the transactions occurred.
- If it doesn't reconcile with the general ledger, then at least part of the discrepancy must have occurred prior to the current database's financial year. Log into the prior financial year database and repeat this process.
Identifying when the transactions occurred
- Run SA1493 with the Show stock valuation for all stock as at date filter set to a date halfway between the start and end of the financial year.
- Repeat the previous step, narrowing the date range until you find the earliest point that does not
- The first day on which the report does not balance is the day on which a transaction has occurred that caused an imbalance.
- Correct the imbalance following the process in Correcting your stock valuation reconciliation.
- Run SA1493 with the Show stock valuation for all stock as at date filter set to the current date.
- If there is no difference, then your stock valuation now reconciles to the general ledger again and no further action is required.
- If there is a difference, then a discrepancy still exists. Follow this process again from Checking the current balance until your values reconcile.
Correcting your stock valuation reconciliation
Correcting discrepancies can be challenging, especially if the issues happened a long time ago, in a prior financial year, or in a locked period.
There are two ways to correct issues, and in both cases, you must have an understanding of what caused them and be certain you have corrected the underlying root cause. If not, the imbalances will continue to return.
You can either:
- Correct the transactions individually; or
- Create a manual journal entry to force your stock on hand accounts to match your inventory valuation.
Correcting transactions individually
Fixing a stock valuation reconciliation can be done by isolating past transactions and correcting them on a transaction-by-transaction basis. That is, any transactions that have used an incorrect general ledger account can be corrected, and it will bring you one step closer to fixing the overall imbalance.
To correct transactions individually, you will first need to identify when they happened by following the process in the Locating discrepancies section. Then, edit the record that caused the incorrect transactions and correct its account.
This method can't always be performed. For example, if:
- The transaction is in a prior financial year;
- The transaction is dated prior to an account's lock date or your database's journal lock date; or
- There are too many transactions to make this process practical.
Example
Suppose you have purchased a stock item, and, at the time, that item's Stock account was not set to a stock on hand account.
When these goods were received in, they would have increased the value of your inventory, but would not have increased the value of the stock on hand general ledger account. This issue would have exposed itself at the time the Receive transaction was processed for the purchase order.
To correct this, you would need to:
- Edit the item and correct its account setup.
- Edit, then immediately update the Receive.
This forces Accentis Enterprise to reprocess the transaction, this time using the correct account.
Creating a manual journal entry to correct the imbalance
The easiest and most effective method for amending differences between your general ledger and inventory values is to create a manual journal entry to the unbalanced stock on hand account.
This is the only situation where you would use a stock on hand account in a manual journal entry.
Before you create the journal entry, you must also establish the reason for the imbalance. This will help you determine where the other side of the journal should be posted.
Don't regularly journal stock values without fixing the underlying cause. If you don't find out why your stock valuation is incorrect, there is a high risk that other transactions will have incorrect values in them.
Example
Suppose your stock reconciliation is as follows.
The stock on hand account 41310 - Raw Materials is out of balance with the general ledger by $9,066.55.
Assuming you have researched the reasons for this imbalance, you would create a journal for $9,099.55 that debits 41310 - Raw Materials and credits the appropriate account.