Stock in, stock out and the stock balance
Stock is money sitting on a shelf. Recording every receipt and issue tells you what you have, what to reorder and what your stock is worth.
In, out and balance
Every movement is either in (bought, returned by a customer, made) or out (sold, used, scrapped). Opening stock + in − out = closing stock. When the book balance and a physical count differ, the difference is recorded as an adjustment, with the reason.
Reorder level
A reorder level is the quantity at which you buy again, so you do not run out while the next order is on its way. A simple rule of thumb is daily use × days the supplier takes, plus a safety margin.
What the stock is worth
Stock is valued at the lower of cost and net realisable value [AS 2 / Ind AS 2, Inventories]. Cost is worked out by a method such as weighted average or first-in-first-out, used consistently.
Practice task
Questions
Does a sales invoice reduce stock?
It depends on how the item and the sale are set up. In this lesson you record the movement directly so you see each step.
Reviewed: 7 Nov 2026. This is general information, not advice from a chartered accountant. Rates and rules change; check the source named in brackets.