Stock value and the ledger

Every quantity and value in Inventory traces back to a running record of stock movements. Understanding how that record works helps you trust the numbers on every other screen.

The stock record

Each time stock moves, a receipt, an issue, a transfer, an adjustment, a reconciliation or a production posting, Villva writes one movement line recording the item, warehouse, category, quantity in or out, the rate, the value, and a link to the source document (for example the goods receipt or transfer it came from).

Key things to know:

• It is append-only. A movement, once posted, is never edited or deleted. If something is wrong, you post a correction movement, the original stays exactly as it was, so history is always trustworthy.
• On-hand is always derived. The quantity on hand for an item in a warehouse is simply the running total of its movements. Screens may cache balances for speed, but they always reconcile back to that total.
• Everything is all-or-nothing. A posting either completes fully (quantity, value and the movement line together) or not at all. You never get a half-recorded movement.

Moving-average valuation

Stock is valued at moving-average cost, the method most Indian SMEs use for closing-stock and cost-of-goods-sold reporting.

How the average is maintained:

1. The first receipt of an item sets its average rate to the receipt rate.

2. Each later receipt blends the incoming value into the existing value:

   new average = (existing qty × existing rate + received qty × received rate) ÷ (existing qty + received qty)

3. Issues and other outward movements are valued at the current average and do not change it.

4. Closing value = on-hand quantity × current average rate.

Worked example

Step	Action	On-hand	Average rate	Stock value
1	Receive 10 @ ₹100	10	₹100.00	₹1,000.00
2	Receive 10 @ ₹120	20	₹110.00	₹2,200.00
3	Issue 5 (valued at ₹110)	15	₹110.00	₹1,650.00

The issue is valued at ₹550 and the average stays at ₹110.

Values are rounded to two decimal places (the Indian rupee convention). The rate itself is carried at higher precision internally so rounding never accumulates errors.

Note

FIFO, LIFO, standard cost and landed cost are not used, Villva values stock at moving-average cost only.

Why this matters

Because on-hand and value both derive from the same movement record, your dashboards, log books, valuation reports and category summaries can never disagree. If a figure ever looks off, the movements behind it are always there to explain it.