Inventory

If you buy things to resell, Solid Accounting tracks quantity on hand, what each unit cost, and the cost-of-goods-sold entries that post when items sell. Open Inventory from the sidebar or Lists → Inventory. Inventory is included on every tier.

Inventory is built on inventory-type items in Items & Services. Each needs an income account, a COGS account, an asset account (usually Inventory, an Other Current Asset), and a cost method.

The Inventory screen

The Inventory screen lists every inventory item with quantity on hand, reorder point, average cost, and total value; items below their reorder point are highlighted. Stock movements shows each purchase, sale, return, transfer, adjustment, and write-off, with the running quantity after each.

Cost methods

Each inventory item uses one of two cost methods, set on the item. New items default to Average Cost.

FIFO (first in, first out). Each purchase is its own cost layer; sales use up the oldest layer first.

Buy 10 at $5  → layer A: 10 × $5
Buy 10 at $6  → layer B: 10 × $6
Sell 12       → COGS = 10 × $5 + 2 × $6 = $62
Left: 8 × $6 = $48

Average Cost. Each purchase blends into a running average across all units on hand.

Buy 10 at $5  → average $5.00
Buy 10 at $6  → 20 units, $110, average $5.50
Sell 12       → COGS = 12 × $5.50 = $66
Left: 8 × $5.50 = $44

When prices rise, FIFO reports lower cost and higher profit than average cost. Average cost gives smoother margins and is the common choice for small businesses. Pick the method before the item has any transactions, and ask your accountant if you're unsure — it affects your tax return.

Buying and selling

Buying. A bill (or a purchase order converted to a bill) for inventory items posts DR Inventory Asset · CR Accounts Payable (or Bank, if you paid by check), adds a cost layer, and raises quantity on hand.

Selling. Posting an invoice with inventory items posts two things together: the sale (DR Accounts Receivable · CR Income) and its cost (DR Cost of Goods Sold · CR Inventory Asset). The cost comes from the item's method. Both share a link back to the invoice.

Purchase orders

Purchase Orders (sidebar or Vendors → Purchase Orders) track what you've ordered. A purchase order doesn't post to the ledger.

New Purchase Order — choose the vendor, add item lines with quantity and unit cost, and save. It starts as Draft.
Approve — marks it as issued to the vendor.
Receive Items — record what arrived. Quantity on hand goes up and a cost layer is added. A partial delivery sets the status to Partially received; the rest stays open.
Convert to Bill — creates the vendor bill from the PO. This is when Accounts Payable and the ledger change. The PO shows Billed.

Cancel order closes a PO you no longer need. Export PDF saves a copy to send the vendor.

Inventory adjustments

When a physical count doesn't match your books — or stock is damaged or stolen — use Transactions → Inventory Adjustment. Choose the item, enter the New Quantity, pick a reason (Physical Count, Damaged, Stolen, Data Correction, or Other), and post. You don't enter a unit cost; Solid Accounting values the difference from the item's cost method.

Count is lower (write-down)
DR  Inventory Adjustment (expense)
CR  Inventory Asset

Count is higher (found stock)
DR  Inventory Asset
CR  Inventory Adjustment

Common gotchas

Negative quantity on hand. A sale was entered before the purchase that supplied it. Enter or back-date the purchase. If you never stock the item (drop-ship), make it a Non-Inventory item.

COGS looks high or low after a price change. Under FIFO, sales use up the oldest layers first, so COGS reflects what you paid then, not today's price. Check Stock movements for the item.

Received on a PO, but the ledger shows nothing. Receiving updates quantity only. The ledger changes when you Convert to Bill.

Year-end count is off by a few units. Normal shrinkage. Post an adjustment with the reason Physical Count.