Glossary
What is closing stock?
What closing stock means, how its value feeds both the profit and the balance sheet, and why perpetual stock books need no year-end entry.
Updated
In short
Closing stock is the value of goods still on hand at the end of a period. SimpleERP keeps it live: every sale, bill and adjustment moves stock at weighted average cost, so the Inventory account always holds it.
Closing stock is the value of raw materials, work in progress and finished goods still on hand at the end of an accounting period. It equals opening stock plus purchases less the cost of goods sold. It appears as a current asset in the balance sheet, becomes next period's opening stock, and is valued at cost or net realisable value, whichever is lower.
Closing stock: a worked example
Lakshmi Steel Furnitures' stock of 4-shelf steel racks between April and September 2026, at weighted average cost.
| Line | Quantity | Value |
|---|---|---|
| Opening stock at ₹3,200 | 40 | ₹1,28,000 |
| Bought from Tamil Nadu Steels at ₹3,450 | 60 | ₹2,07,000 |
| Available at average ₹3,350 | 100 | ₹3,35,000 |
| Sold, cost of goods sold at ₹3,350 | 70 | ₹2,34,500 |
| Closing stock | 30 | ₹1,00,500 |
FAQ
Questions, answered
What is the formula for closing stock?
Closing stock equals opening stock plus purchases minus the cost of goods sold. With a physical count you value the units on hand at cost instead, and the two figures should agree; any gap is shrinkage, damage or an entry error.
Do I need a closing stock entry at year end?
Not in SimpleERP. In a periodic system, such as Tally without integrated inventory, you key closing stock in at year end. SimpleERP posts cost of goods sold with every sale, so the Inventory account already shows closing stock.
How does SimpleERP value closing stock?
At weighted average cost, recalculated each time stock comes in. FIFO and other methods are not offered. The stock list shows total stock value next to the Inventory account balance with a difference that should be zero, as a check you can see.
What if my physical count differs from the books?
Post a stock adjustment with the reason physical count, entering the counted quantities. The difference moves Inventory against the Inventory Adjustments expense account, so the books match the shelf and the loss shows in profit.
Related
Keep reading
Weighted average cost
A stock valuation method where every unit carries the same cost: stock value divided by quantity, re-blended on each receipt.
Read moreCost of goods sold (COGS)
The cost of the stock sold in a period, subtracted from sales for gross profit.
Read moreOpening balance
The balance an account carries into the first day of a new set of books, taken from the old books' closing figures.
Read more
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