A Comprehensive Guide To Methods Of Inventory Valuation

Inventory is a term used in accounting to describe items that are in various phases of being prepared for sale.

The various phases include:

1. Finished goods (stock available for sale)

2. Work-in-progress goods (stock that is in process of being manufactured)

3. Raw material (stock that is yet to be used to make finished goods)

It goes without saying that inventory is one of the most important aspects of a business that if left unchecked may lead to losses. 

The key is that inventory must be monitored periodically to ensure that you are aware of what is happening in your warehouse. Once your item arrives, you must guarantee that you have appropriate stock of the finest quality at all times, as it is what represents your business to the customer.

Why is your Inventory valuation Very Important?

• To determine gross profit

• To figure out the financial position of the business

• Helps to cut down on tax liability

• To help with the application for a loan for business expansion

• Attracting new investors and keeping existing shareholders happy

An inventory valuation allows your business to assign a monetary value to the goods in its inventory. Inventory is the company's largest current asset, hence it needs an accurate measurement to provide correct financial statements. If you don't measure your inventory effectively, your expenses and revenues won't match, and you'll end up making bad business judgments.

This is critical since an excess or shortfall of inventory will have an impact on your company's productivity and revenue.

Inventory Valuation Methods

a) FIFO

One of the most common inventory valuation methods is "first in, first out."

FIFO suggests that the oldest goods in your warehouse should be sold first. So, if you acquired a stock in January and another in July, you should try to sell the January stock first. Because prices tend to climb over time in most circumstances, the inventory you have left is worth more at current pricing.

Likewise, since the cost of your goods sold is based on the cost of previous inventory, the cost of your goods sold is lower. Finally, you'll have larger earnings to report on your balance sheet, which will result in a higher taxable income. FIFO is also popular since it demonstrates good business sense. Because you don't want your inventory to sit around for too long, you sell it first.

b) Weighted Average

In the Weighted Average Unit Cost (WAC) method, you divide the total current costs by the total of the quantities purchased to arrive at a weighted average cost. 

This is an accounting technique that is used to value current inventories and has financial transaction recognition. Companies make assumptions about which goods will be sold and which will remain in inventory. 

This is typically used for items with similar prices that are equivalent over time. As a result, the average price for these is calculated over time. Crude oil is an example of this. It is non-perishable in nature and can be stored for a long time. 

Practically, the company's inventory management or cloud accounting software calculates the weighted average unit cost automatically.

If you want to figure out how much your inventory is worth, the best and most accurate technique is to use Weighted Average Cost. 

c) LIFO

The Last in First Out (LIFO) approach is the polar opposite of the FIFO method. You sell the inventory that arrives last in your firm using this method. So, if you bought one stock in April and another in September, you should sell the September stock first. It increases the alignment of your present business costs, but it is not appropriate in all cases. As a result, the cost of goods is greater, and so the gross profits are lower, and thus the taxable income is lower.

To Sum it up:

The two most common methods for valuing inventory are the Weighted Average Cost Method (WAC) and first-in, first-out (FIFO). LIFO isn’t widely used and is not really that preferable.

When opposed to WAC, FIFO actually delivers a superior estimate of your Gross Margins because businesses typically sell their oldest things quickly. It all depends on the type of valuation and what you're hoping to achieve with it. When it comes to inventory valuation methods, though, it's critical to understand your needs before deciding which one is best for you.

Cloud-based accounting software efficient in inventory management is what will help in determining the best method to calculate your inventory. 

Here is a list of GST-compliant accounting, inventory, and payroll software that is cloud-based. It captures all transactions related to inventory and generates reports quite quickly and efficiently helping you to make better decisions on time.

Reference:

https://dclouds.in/best-accounting-software-india/

7 Best Incredible Features of RealBooks Business Cloud Accounting Software

The face of accounting has changed tremendously in the past few decades. All thanks to the exponential growth of technology. 

Since the introduction of Visicalc, the first spreadsheet software, in 1978, given birth to computerized accounting and more technology platforms to date. 

A study by Atherton Research, in 2018, predicted the automation of all accounting activities along with payroll, taxes, audits, and banking with the help of AI-based technology. 

And it holds true!

Because in the next two years since the release of that study, the world was introduced to a plethora of accounting software online. 

In India, in the year 2010, it was reported that the country’s accounting software market is projected to grow at a CAGR of more than 14% from 2016 to 2021.

A huge number of large-scale businesses form a major part of the end-users of online accounting software in India. And by this year, the user base has grown towards small and medium-sized enterprises across the country, as a result of increasing IT spending coupled with rising government support and other similar integrations. 

In this article, we’re going to talk about Realbooks accounting software to better understand the growing need for online accounting software across businesses and industries

Here are the 7 best features of Realbooks

Realbooks is an easy-to-use cloud-based Accounting  – Inventory – Payroll platform that provides a centralized database to run your entire business at your fingertips.

These are several Incredible features that make Realbooks an efficient, effective, scalable, and fastest growing online accounting software in India

1. Consolidated Reporting

Realbooks is a comprehensive feature-packed accounting solution that not only helps in accounting but also in generating MIS business reports. 

Realbooks simplifies the following

a) Know the details of your business accurately
b) Get profitability of company, branch, project
c) Track payables and receivables easily
d) Monitor productivity with order & sales report
e) Batch Management & Quality Checking
f) Production Plan & Material Requisition Planning
g) Get profitability statement for profit/cost groups
h) View reports filtered by profit/cost center

It does not matter whether you are a small business or a Fortune 500 company, Realbooks’ comprehensive feature list, combined with unique intelligence tools, will definitely ensure higher business efficiency.

2. Simplified Tax Compliances

It is important accounting software to keep up with changing tax compliances. Realbooks provides

a) Setup available to automatically calculate  GST and TDS
b) View reports for GST and TDS payments
c) Generate reports for GST and TDS returns
d) Generate GST compliant Invoices

Realbooks is directly integrated with the GST portal, so your business can manage your tax invoices with ease.

3. Collaborative workspace

Realbooks recognizes the importance of coordinated collaboration to ensure smooth functionality and efficiency.

With this software, your employees won’t have to experience redundant operations and wastage of precious time and manpower in manually conducting repetitive tasks.

Realbooks ensures

a) Easy handling of millions of records and transactions
b) Define permissions and restrict access to data
c) Restrict backdated entries and edits
d) Create unlimited companies and branches
e) Get consolidated reports for all branches
f) Auto-posting for inter-branch entries
g) Define permissions for users in various branches

Because all data is compiled, exchanged, stored, and retrieved through the same piece of software, your employees don't have to worry about its accuracy or completeness.

4. Paperless Office

Accounting activities generate a lot of paperwork and cloud accounting software can help you go paperless. 

With Realbooks you can

a) Upload bills to the cloud directly or via dropbox with a document attachment feature that enables

b) You to attach scanned physical documents to each entry
c) Define rules for approving bills for payments
d) Retrieve old uploaded bills/documents
e) Centralize bookkeeping

This can help your business to establish a green initiative and even cut costs

5. Customizable dashboard

Realbooks provides a customizable dashboard with a really good graphical representation of your reports. 

The Maker-Checker feature is fully customizable with unlimited ​levels based on voucher type, ledger, amount, etc​. It also helps to track dealer-level sales, state-wise sales, plant level accounting.

And all being maintained real-time, without any requirement to synchronize data. 
To summarize, Realbooks’ dashboard enables you to

 

a) Know your company's finances at a glance
b) Analyze the profitability of branches & projects
c) Budget money with a summary of dues
d) Know the status of compliances done

6. Enhanced analytics and accessibility

The best thing about online accounting software is that they provide remote access.

Anyone can access them from anywhere, saving time and other important resources. The analytics of the software makes business functionality smooth by generating reports routinely. 

With Realbooks web accounting software you can:

a) Get intelligent notifications on mails
b) Set rules for notifications on transactions
c) Get RealBooks to send you automated reports
d) Set up a schedule for receiving various reports
e) Access your books anytime and anywhere
f) Get rid of expensive Servers and the IT team
g) Generate invoices offline at factories and shops
h) Availability on iOS and Android
i) Browser and Operating system flexibility

7. Ensured Security

Cloud accounting software is safe to use. Some of the best online accounting software in India use premium services as hosts to take it up a notch for ensuring data security.

Realbooks uses Amazon Web Services, so the data has multi-level back-ups, replications, and other protective measures that ensure it is secure. 

All these features are what a business should look for before investing in new accounting software. It is a feature-packed tax compliant GST accounting software that makes your business operations and other day-to-day accounting tasks a breeze. 

That’s why Realbooks is known as one of the best online accounting software in India in 2021. 

It also provides a 14 day trial period and startup subscription plan at a very reasonable price

If you’re a small business owner or a seasoned business with multiple branches, then head to online accounting today.

7 Reasons Why You Need to Invest in Cloud Accounting Software

The days of manual entries were long gone when desktop accounting software was introduced. It revolutionized the way accounting was done, providing much-needed structure to a business activity that needs tonnes of paperwork and calculations which were prone to human errors. 

But like everything else, that software had its share of pros and cons. Innovations happen and the world was once again introduced to yet another revolutionary way of running a business cloud computing. 

Cloud computing refers to the delivery of computing services via the internet. These services may be in the form of storage, data analysis, or accounting.

While many people believe that the term "cloud" is overdone, it has never been more relevant. People were forced to work from home as a result of the covid pandemic and subsequent lockdowns. It became impossible to access essential files without access to the office desktop. 

While firms that had previously recognized the value of cloud computing were able to effortlessly transition to remote employment.

 

Here are 7 reasons why investing in cloud accounting software is the best decision you’ll make in 2025

Cloud accounting is a type of accounting that uses a system that can be accessed over the internet. It performs similar functions to desktop accounting software, but it goes above and beyond by offering a slew of additional features.

Financial administration is streamlined and can be viewed and adjusted remotely with cloud accounting software. While there are many such cloud accounting software available, the following benefits listed below might guide you better in understanding what suits you best.

1. Anytime, Anywhere Access

The benefit of a virtual space is that, as opposed to the static infrastructure of an office desktop, it can be used anytime, anywhere by anyone who has authorized access. Cloud accounting software provides a centralized database over the internet with 24x7 usability. 

A person can be anywhere in the world and view documents on any operating system and even phone. 

A pure cloud-based and online accounting software with robust features provide great mobility and dynamic features and functions along with the mobile application that is accessible via Android and IOS.

2. Automation benefits

Waiting is a lethargic game and with traditional accounting, one had to wait for the accountant to find the relevant documents and notes until it was on your desk. Suppliers and buyers had to wait several business days for their invoices to arrive. 

Cloud accounting software eliminates all these unnecessary steps and saves time by providing documents on the go with just a click. 

And most online accounting software has this very unique feature of document attachment. An accountant can attach documents to each and every entry, by scanning the actual file and uploading it. This feature converts the file to an image such that it opens next to the entry each time you open the voucher. 

This makes the approval and audit process less time-consuming and efficient.

3. Consolidated Collaborations

An important requisite while considering the right cloud accounting software must be the collaborative space it provides. The software should be such that it can be used by multiple users and allows better administration control for businesses that have several branches. 

Most accounting programs today provide a collaborative space that can host 100+ users at a time. The cloud accounting software helps to practice better control across all departments. Of course, it comes with an additional feature to restrict IP-based and mobile-based access such that not everyone can access the data anywhere they wish, to maintain authenticity. 

Another feature is Branch Accounting. If you’re a business with several branches, then this feature might make inter-branch transactions less cumbersome.

You make an entry in one branch, transfer goods from one branch to another, and the corresponding entries in the other branches are automatically posted. 

4. Cost-effectiveness

Cloud accounting software is an economic option compared to desktop software. As it is browser-based, there is no cost of installation. It doesn’t require any hardware costs, IT personnel,  server set up, infrastructure, etc

It helps avoid a ton of paperwork and hence saves expenses on paper and posts. Being online allows you to cut fixed costs while also making the software much more scalable. 

And since, cloud accounting software primarily works SaaS model, the upfront costs are low. The renewal costs tend to be pocket-friendly making it a viable option for small businesses.

Most accounting software subscription plans start at USD 150 per year allowing companies to scale up as and when they grow and add users.

5. Important compliances

Businesses need accounting software that is compliant with the GST or VAT portal since they may need to validate GST/VAT calculations.

The cloud-based accounting applications are integrated with the GST portal. This implementation helps to manage tax invoices with ease and track all information needed to have a seamless return filing.

6. Go Paperless

While the economy strives to be paperless day by day, investing in cloud accounting software can prove to be a business’ green initiative. 

Why waste resources like paper when you have an economical option to save your data on a centralized cloud?

7. Security guaranteed

Contrary to the notion that cloud-based software might be subjected to hacking, cloud accounting software is generally safer than any other option available. 

If these concerns were true, then the majority of the SaaS model companies might have not been as successful as they are today.

For instance, most applications are hosted on Amazon Web Services, with multiple levels of back-ups, replications, and data protection measures that have been undertaken.

In Conclusion:

whether you’re a small, medium, or large-scale business owner, you need to invest in cloud accounting software that fits your business. It provides a plethora of features that result in maximum business efficiency. 

Planning to buy or switch to better-suited accounting software?

There are many applications available with the most comprehensive and feature-rich cloud-based accounting software solutions available all around the world.

Thus cloud-based accounting software makes things easier for businesses and accountants alike.

The cloud accounting model truly defines accounting for the 21st Century.