update Stock to Nominal (Intro)
This option enables you to maintain the value of the Stock shown in the Balance Sheet on a day-to-day basis, by automatic updates of Stock Movements from the Sales and Purchase Ledgers and the Stock Module.
Update Stock to Nominal is a System Control setting that enables you to update the Nominal Ledger with Stock related transactions from the Sales and Purchase Ledgers and the Stock Module. In this way you can automatically maintain your Stock Valuation and Cost of Sales.
This feature requires the creation of special Analysis Codes to record the Stock transactions. Once these are set, the Nominal Ledger updates will take place automatically making this feature easy to use whilst remaining flexible and extremely powerful.
Overview
Different types of transactions update the Nominal Ledger in different ways.
Purchasing Stock (using Purchase Order Processing)
Ordering stock (raising a batched Purchase Order) has a Commitment Accounting effect on the Nominal Ledger.
The receipt of goods (moving goods into Stock) involves a double entry in the Nominal Ledger to increase the value of the Stock and to accrue for the goods received but not yet invoiced.
Entering Purchase Invoices involves a double entry in the Nominal Ledger to increase Creditors and reduce the accrual for the goods received but not yet invoiced.
The required double entry will also be made to deal with any difference between the Purchase Order price and the Invoice price.
At the Month End, accruals for goods received but not yet invoiced will update the Nominal Ledger.
Sale of Stock (using Sales Order Processing)
Creation of Sales Orders has no effect on the Nominal Ledger.
Despatching goods (moving goods out of Stock) involves a double entry in the Nominal Ledger to decrease the value of the Stock and increase the Cost of Sales.
Entering Sales Invoices involves a double entry in the Nominal Ledger to increase Sales and Debtors and to account for VAT.
At the Period End, accruals for goods delivered but not yet invoiced will update the Nominal Ledger.
Moving Stock within your business
Stock Movements, Stock Takes and Stock Transfers involve double entry in the Nominal Ledger to increase or decrease the value of the Stock.
Assembling Stock items will change the value of the Stock in the Nominal Ledger and will require double entry to deal with any difference in the Assembly Costs.
Following a Period End, a Stock Take will generate Stock Movements. These will cause Nominal Ledger Journals, which will update the Balance Sheet Stock values.
Implementation
The Update Stock to Nominal facility may be implemented to meet your exact requirements using two principle areas of settings.
In System Control the facility can be turned on or off.
The use of Analysis records to control the mapping of different transaction types to the Nominal Ledger. These can be set up simply, all stock types updating the Nominal in the same way, or specifically, each stock record having its own Nominal update rules.
Careful consideration should be given to the Stock Valuation method used as this will affect the values transferred to the Nominal.