The goods you have received from your vendor need to be valued and you need to keep track of the quantities available in your warehouse. Sometimes you need to support special scenarios like vendor consignment stock, perform quality inspections, or transfer stock to other distribution centers.
Inventory Management - Valuation
Activities relevant for valuation
Material valuation is not an isolated area and most of the functions are carried out automatically. Depending on the organization the activities that are performed manually are part of the areas of inventory management, invoice verification, or accounting.
Valuation connects Logistics and Financial Accounting by accessing and updating the G/L accounts.
The value of the material stock is calculated using the following simple formula:
Stock value = stock quantity * material price.
Therefore, the stock value changes if the stock quantity or the material price changes.
The calculation can be based on the purchase price and the sales price (in pricing and revaluation, the sales price is sometimes referred to as the 'retail price').