Inventory Valuation Report — Complete User Guide — Two Accounts Web

Comprehensive guide for the Inventory Valuation Report — enabling it, creating the report, every field, every column, how the valuation is calculated under each costing method, and validating each figure against the General Ledger and accounting regulations

Table of Contents

1. What Is the Inventory Valuation Report?
2. Prerequisites — Enabling via the Customize Menu
3. Navigating to the Report
4. The Report List
5. Creating the Report — Field-by-Field
   • 5.1 From Date and To Date
   • 5.2 Description
   • 5.3 Valuation Method
   • 5.4 Location
   • 5.5 Division
   • 5.6 Specific Items
   • 5.7 Show Options (Quantity, Unit Cost, Comparison, LCNRV)
   • 5.8 Exclude Items With No Movement
6. Report Output Columns
7. How the Valuation Is Calculated
   • 7.1 Source of the Data
   • 7.2 The Costing Method
   • 7.3 Closing Quantity
   • 7.4 Closing Value
   • 7.5 Unit Cost
   • 7.6 Comparison Values (FIFO / LIFO / Moving Average)
   • 7.7 LCNRV Write-Down
   • 7.8 Negative Inventory (Backlog)
   • 7.9 Total Row and Footer
8. Related Settings and Configuration
9. Sample Data and Report Output
   • 9.1 Sample Setup
   • 9.2 Creating the Report
   • 9.3 Report Output
   • 9.4 Report Output — With Comparison and Unit Cost
   • 9.5 Calculation Verification
10. General Ledger Verification
11. Reporting and Accounting Impact
12. Accounting Regulation Validation
13. Common Issues and Best Practices

1. What Is the Inventory Valuation Report?

The Inventory Valuation Report values the closing stock of every inventory item as at the end of a period you choose, using the costing method you want. For each item it shows the closing quantity, the total value of that stock, and (optionally) the unit cost — so you can see exactly how much money is tied up in stock.

The report is unusually flexible:

• Valuation Method — you can value the whole report under FIFO, LIFO, or Moving Average, overriding each item's own setting, so you can compare what closing stock would be worth under each method.
• Show Comparison — with one switch, add three columns that value the closing stock under all three methods side by side (FIFO / LIFO / Moving Average).
• LCNRV — optionally show the Lower of Cost or Net Realisable Value write-down, so you see the carrying value after impairment.
• Location, Division, and Specific Items — narrow the report to the stock you care about.

Like most reports here, it is a saved report: choose your period and options once, save it, and reopen it any time. The output is printable, emailable, and exportable.

2. Prerequisites — Enabling via the Customize Menu

The report appears under Reports only when the Inventory Items tab is enabled for the business. Inventory Items is not enabled by default.

How to Enable

1. Open the Customize Menu from the navigation bar.
2. Find the Inventory Items toggle and turn it on.
3. Click Update / Save to apply.

Once enabled, the report is available under Reports → Inventory Items → Inventory Valuation Report.

3. Navigating to the Report

From the main navigation bar:

1. Open Reports.
2. Go to the Inventory Items category.
3. Click Inventory Valuation Report.

This opens the report list — every saved Valuation Report for the business appears here, sorted by its From Date (newest first).

4. The Report List

The list shows one row per saved report, with five columns:

Each row is clickable:

• Click the row to open the report output (the closing-stock valuation table).
• Edit opens the report form to change any setting.

A New Report button at the top creates a fresh report.

5. Creating the Report — Field-by-Field

Click New Report to open the report form. It contains the following fields:

5.1 From Date and To Date

5.2 Description

5.3 Valuation Method

5.4 Location

5.5 Division

5.6 Specific Items

5.7 Show Options (Quantity, Unit Cost, Comparison, LCNRV)

Four toggles control which columns appear:

5.8 Exclude Items With No Movement

6. Report Output Columns

The report opens with a subtitle and the method:

For the period from {From Date} to {To Date}
{Valuation Method} — e.g. "FIFO"

The table reads one row per inventory item, listed alphabetically by the item's Code - Name. The columns depend on your Show options:

* Columns marked with an asterisk are optional — they appear only when the matching Show toggle is on.

7. How the Valuation Is Calculated

7.1 Source of the Data

The report is built from the business's General Ledger inventory on-hand postings. It runs the ledger through the system's cost-of-goods-sold calculation using the chosen Valuation Method, so the closing cost layers reflect that method's consumption rules.

7.2 The Costing Method

• FIFO — oldest layers are consumed first; closing stock is valued from the newest layers.
• LIFO — newest layers are consumed first; closing stock is valued from the oldest layers.
• Moving Average — a new average unit cost is computed after each receipt; closing stock is valued at the current average.

The report's Valuation Method drives the Total cost column. Each item's own method setting is used when the report shows its natural valuation, and the Comparison columns show what the same stock would be worth under each of the three methods regardless of the item's own setting.

7.3 Closing Quantity

Closing quantity = opening stock quantity
                 + period purchases quantity
                 + debit-note quantity
                 + period sales quantity
                 + period adjustment quantity

These pieces are drawn from the item's inventory on-hand postings up to the To Date:

• Opening stock = postings on or before the From Date (plus opening-inventory entries and relevant document types such as goods receipts, deliveries, transfers, write-offs, production, and LC-created layers).
• Period purchases = purchase-invoice / expense-claim / payment / LC postings inside the period.
• Debit notes, sales/credit notes, and adjustments (journal entries, write-offs, production) each feed their component.

7.4 Closing Value

Closing value (Total cost) =
  sum of the item's inventory on-hand ledger amounts up to the To Date,
  excluding automatic cost-of-goods-sold sales lines,
  valued under the chosen method;
  floored at zero (never shown as negative).

This is the net value of the stock on hand at the To Date under the report's Valuation Method — the same figure the Balance Sheet uses for inventory (before any LCNRV adjustment, applied next).

7.5 Unit Cost

Unit cost = Closing value ÷ Closing quantity
            (rounded to the base currency's decimal places; 0 when quantity is 0)

7.6 Comparison Values (FIFO / LIFO / Moving Average)

With Show Comparison on, the report re-runs the cost-of-goods-sold calculation under each method and sums each item's inventory on-hand amounts to the To Date, so the three columns show the closing value under FIFO, LIFO, and Moving Average independently. Each is floored at zero.

7.7 LCNRV Write-Down

Where an item has BOTH:
  - a Net Realisable Value per Unit set, and
  - "Apply LCNRV" checked,
the closing value is capped:

  Closing value (after LCNRV) = min( cost value, NRV per unit × closing quantity )

LCNRV Adjustment (shown) = cost value − NRV per unit × closing quantity
                           (never less than 0)

This is the Lower of Cost or Net Realisable Value rule (IAS 2). Where neither field is set, no write-down applies and the LCNRV Adjustment shows 0.

7.8 Negative Inventory (Backlog)

If the computed closing quantity would be negative (items sold before received), the report shows a backlog note on the row — [Backlog (Negative Qty): {N}] — and values the row as having zero closing quantity. The row is also highlighted so the backlog is easy to spot.

7.9 Total Row and Footer

• A Total row at the bottom sums every numeric column across all items.
• The report's Description is printed as the footer of the output page.

8. Related Settings and Configuration

9. Sample Data and Report Output

9.1 Sample Setup

Business settings

Transactions

Inventory items and their ending position

9.2 Creating the Report

From Reports → Inventory Items → Inventory Valuation Report, click New Report and enter:

9.3 Report Output

For the period from {From Date} to {To Date}
FIFO

9.4 Report Output — With Comparison and Unit Cost

Turning on Show Quantity, Show Unit Cost, and Show Comparison produces a richer valuation table:

For the period from {From Date} to {To Date}
FIFO

9.5 Calculation Verification

Widget-X (ending 75 units):

Layers: 100 @ 10 , 100 @ 12 , 50 @ 14
FIFO ending value = 25 @ 12 + 50 @ 14  = 300 + 700      = 1,000   ✓
LIFO ending value = 75 @ 10            = 750                      ✓
MA ending value   = 75 @ 13.33 ≈       = 1,000 (rounded) ✓

Unit cost = 1,000 ÷ 75                 = 13.33                     ✓

Gadget-Y (ending 90 units):

Layers: 100 @ 20 , 100 @ 22   →   average 21.00
MA ending value   = 90 @ 21.00 = 1,890                  ✓
FIFO ending value = 90 @ 22    = 1,980                  ✓
LIFO ending value = 90 @ 20    = 1,800                  ✓

Unit cost (MA) = 1,890 ÷ 90    = 21.00                  ✓

Component-Z (ending 100 units, Periodic LIFO):

Layers: 100 @ 30 , 100 @ 32 , 50 @ 34
LIFO ending value = 100 @ 30  = 3,000                  ✓
FIFO ending value = 50 @ 32 + 50 @ 34 = 1,600 + 1,700 = 3,300  ✓
MA ending value   = 100 @ 31.60 ≈ = 3,160              ✓

Unit cost = 3,000 ÷ 100 = 30.00                        ✓

Total row:

Quantity  = 100 + 90 + 75   = 265        ✓
Unit cost = 30.00 + 21.00 + 13.33 = 64.33 ✓
Total cost= 3,000 + 1,890 + 1,000 = 5,890 ✓

10. General Ledger Verification

Every figure in the report is a sum of General Ledger inventory on-hand postings. For example, Widget-X's ending position comes from its layers:

Dr InventoryOnHand (Widget-X)   100 @ 10 = 1,000   (T1)
Dr InventoryOnHand (Widget-X)   100 @ 12 = 1,200   (T4)
Dr InventoryOnHand (Widget-X)    50 @ 14 =   700   (T10)
                                 ───────────────
Total in                     = 2,900
COGS consumed (T7, T11, T14, T17)   = 1,900
Closing on-hand (Widget-X)    = 1,000   (75 units)

How each report column maps to the GL:

Cross-check with the walkthrough's Trial Balance / Balance Sheet (ending inventory portion):

InventoryOnHand (Widget-X)      1,000
InventoryOnHand (Gadget-Y)      1,890   (80 Loc A + 10 Loc B)
InventoryOnHand (Component-Z)   3,000
                            ────────────
Total InventoryOnHand           5,890   ✓  (matches the report's Total cost)

11. Reporting and Accounting Impact

• Balance Sheet: The Total cost per item is the closing inventory balance on the Balance Sheet. The grand total (5,890 in the sample) equals the inventory asset carried.
• Profit & Loss: Because a higher closing inventory lowers COGS (and raises profit), the valuation method directly affects reported profit. The comparison columns quantify this — the sample shows close-to-close values ranging from 5,550 (LIFO) to 6,280 (FIFO).
• Impairment (LCNRV): Where market value has fallen below cost, the report shows and applies the required write-down, keeping the Balance Sheet inventory at the lower of cost and NRV.
• Management decisions: Method, location, and item filters let management model "what if we valued differently" or "what is our stock worth by warehouse" without touching the books.
• Audit evidence: Every figure traces to cost layers and GL postings, making the valuation fully auditable.

12. Accounting Regulation Validation

13. Common Issues and Best Practices

13.1 The Report Does Not Appear

Cause: The Inventory Items tab is not enabled, or the user lacks report permission.

Solution: Enable Inventory Items in the Customize Menu, or ask the administrator to grant report access.

13.2 An Item Is Missing From the Report

Cause: The item is inactive (always excluded), it has no inventory transactions up to the To Date and "Exclude Items With No Movement" is on, or a Location / Division / Specific Items filter excludes it.

Solution: Remove the filters, turn "Exclude Items With No Movement" off, or reactivate the item.

13.3 Total Cost Differs From My Other Reports

Cause: The Total cost reflects the report's Valuation Method (which overrides each item's method) and may include an LCNRV cap. A different method yields a different value (e.g. FIFO 6,280 vs LIFO 5,550 in the sample).

Solution: Check which method the report is set to and whether LCNRV applies. Use Show Comparison to see all methods at once.

13.4 Unit Cost Shows 0

Cause: The item's closing quantity is 0 (or negative and treated as backlog), so unit cost is not meaningful and is shown as 0.

13.5 LCNRV Adjustment Is 0 for an Item That Should Be Written Down

Cause: Both an NRV per unit and "Apply LCNRV" must be set on the item. If either is missing, no write-down is applied.

Solution: Set the NRV Per Unit and check Apply LCNRV on the item, then re-run.

13.6 An Item Appears With a Backlog Note

Explanation: The computed closing quantity was negative (items sold before received). The report shows [Backlog (Negative Qty): N] and values the row at zero quantity until the backlog is fulfilled by stock arriving.

Best Practices

• Run one report per period (e.g. monthly/quarterly) with a clear Description — the saved list makes valuation trend analysis easy and the Description prints as the footer.
• Reconcile the Total cost to the Balance Sheet inventory account for the same date.
• Use Show Comparison at period end to quantify the method's impact on value (and therefore profit).
• Turn on Show Quantity and Show Unit Cost when auditing — they make the value easy to trace to the on-hand units.
• Enable LCNRV on items whose market value may be below cost at period end, and review the LCNRV Adjustment column.
• Pair this report with the Inventory Quantity Summary to verify quantity first, then value.

End of Inventory Valuation Report Guide