# Stock and Valuation

Turning on stock tracking makes an item countable.

Choosing a valuation method decides what those units are worth when they leave. Both settings are easy to set and awkward to change, so this article is about getting them right first.

## Stock tracking

A tracked item has a quantity per location, and every movement is a document: a purchase receive in, a shipment out, an adjustment or transfer in between. An untracked item has none of that, which is exactly right for a service and exactly wrong for a warehouse.

| With tracking on | With tracking off |
| --- | --- |
| Quantity per location | No quantity at all |
| Appears in stock reports | Invisible to stock reports |
| Cost recognised when sold | Cost recognised when bought |
| Can be picked, packed and shipped | Billed without any stock document |
| Posts to a stock asset account | Posts straight to an expense account |

> **Warning:**
>
> **Do not switch tracking off after transacting**
>
> Existing movements would be left describing stock nobody counts any more, and the value sitting in your stock asset account has nowhere to go. If an item genuinely changed nature, create a new one.

## Valuation methods

When you sell a unit, which unit did you sell? Nothing physical answers that, so the valuation method decides it, and it decides your cost of goods and therefore your margin.

There are two, and no others.

- **FIFO** (first in, first out): The oldest units leave first, so cost of goods follows your oldest purchase prices. The most common choice and usually the most intuitive.
- **Weighted Average Cost** (blended, shown as WAC): Every unit is worth the average of what you have paid. Smooths out price movements and is simpler to explain.

Per-unit costing, where each individual unit carries the cost it was bought at, is not offered. For serialised high-value goods that means FIFO is the closest fit.

> **Note:**
>
> **Valuation is per item, and per variant**
>
> It is not inherited from the parent. A product whose variants use different methods is legal and is almost always an accident, so check it when you generate variants.

## Setting opening stock

- **Count what you actually hold, per location**

  Per variant, since each variant holds its own stock.
- **Record a stock adjustment with reason Opening balance**

  Not a purchase receive, because you did not buy it today.
- **Enter the counted quantity and the unit cost**

  The cost is what your existing stock is genuinely worth, which sets your starting valuation.
- **Check the stock summary report**

  Against your count sheet, before anybody transacts.