Overview

This article will delve into what Perpetual Inventory is, how it works in iVendNext, its benefits, and key features.

Note: If you disable perpetual inventory, users will have to manage the account entries manually.

1. What is Perpetual Inventory?

Perpetual Inventory is an inventory management method where stock levels and financial accounts are updated continuously, in real-time, with every transaction. This means that every time you purchase, sell, transfer, or adjust inventory, the system automatically records the impact on both your physical stock and financial records.

• Real-Time Tracking: Stock levels and account balances are updated instantly, providing up-to-date information at all times.

• Automatic Accounting Entries: The system generates General Ledger (GL) entries for every stock transaction, eliminating the need for manual journal entries.

• Accuracy: By maintaining real-time sync between the Stock Ledger and the General Ledger, Perpetual Inventory ensures accurate financial reporting.

2. How Perpetual Inventory Works in iVendNext

In iVendNext, the Perpetual Inventory System is designed to simplify inventory management while ensuring financial accuracy. Here’s how it works:

2.1 Automatic General Ledger Entries

Every stock transaction in iVendNext triggers an automatic accounting entry in the General Ledger. For example:

• Purchase Receipt: When you receive goods, the system debits the Stock-in-Hand Account (asset) and credits the Stock Received But Not Billed Account (liability).

• Sales Invoice: When you sell goods, the system credits the Stock-in-Hand Account and debits the Cost of Goods Sold (COGS) account.

2.2 Real-Time Stock and Account Syncing

The Perpetual Inventory System ensures that the Stock Ledger (physical stock) and the Stock Account (financial stock value) are always in sync. This eliminates discrepancies between physical stock counts and financial records.

2.3 Handling Back-Dated Transactions

iVendNext can handle back-dated transactions seamlessly. If you enter a transaction with a past date, the system recalculates all future stock and account balances to reflect the changes accurately.

2.4 Valuation Methods

iVendNext supports various inventory valuation methods, such as FIFO (First-In, First-Out) and Moving Average, to determine the cost of goods sold and the value of remaining inventory. This ensures accurate financial reporting based on your preferred valuation method.

3. Benefits of Using Perpetual Inventory in iVendNext

3.1 Improved Accuracy

By maintaining real-time sync between stock and account balances, Perpetual Inventory ensures that your financial statements (Balance Sheet and Profit & Loss) are always accurate.

3.2 Time Savings

With automatic GL entries, you no longer need to manually create journal entries for every stock transaction. This saves time and reduces the risk of human error.

3.3 Better Decision Making

Real-time inventory and financial data enable you to make informed decisions about purchasing, pricing, and sales strategies.

3.4 Compliance

Perpetual Inventory helps you comply with accounting standards and tax regulations by ensuring accurate and up-to-date financial records.

3.5 Handling Complex Transactions

Whether it’s back-dated transactions, landed costs, or stock adjustments, Perpetual Inventory in iVendNext can handle complex scenarios with ease.

4. Key Features of Perpetual Inventory in iVendNext

4.1 Default Accounts

iVendNext provides default accounts for Perpetual Inventory, such as:

• Default Inventory Account: Tracks the value of stock-in-hand.

• Stock Received But Not Billed: A temporary account for goods received but not yet invoiced.

• Stock Adjustment Account: Used for adjusting stock values during discrepancies.

• Expenses Included in Valuation: Tracks additional costs (e.g., shipping, customs) that are included in inventory valuation.

4.2 Warehouse-Level Accounting

You can link specific accounts to individual warehouses, allowing for granular tracking and reporting. For example:

• Stores Warehouse: Linked to the "Stores" account.

• Finished Goods Warehouse: Linked to the "Finished Goods" account.

4.3 Landed Cost Vouchers

iVendNext allows you to add additional costs (e.g., shipping, customs) to inventory through Landed Cost Vouchers. These costs are automatically included in the inventory valuation, ensuring accurate costing.

4.4 Stock Adjustments

If there are discrepancies in stock counts, you can use the Stock Adjustment feature to reconcile physical stock with system records. The system automatically adjusts the corresponding financial accounts.

5. Example of Perpetual Inventory in Action

Let’s consider an example to understand how Perpetual Inventory works in iVendNext:

5.1 Purchase Receipt

• You purchase 10 units of an item at $200 each.

• The system debits the Stores Account (Stock-in-Hand) by $2,000 and credits the Stock Received But Not Billed Account by $2,000.

5.2 Purchase Invoice

• When you receive the supplier’s invoice, the system debits the Stock Received But Not Billed Account by $2,000 and credits the Creditors Account by $2,000.

5.3 Sales Invoice

• You sell 5 units of the item at $300 each.

• The system credits the Stores Account by $1,125 (based on FIFO valuation) and debits the Cost of Goods Sold (COGS) account by $1,125.