Inventory Accounting Explained: How to Record Purchases, Sales, Cost of Goods Sold, and Stock Adjustments

Inventory accounting begins by recording purchased goods at their appropriate cost and recognizing the cost of goods sold when inventory is sold, depending on the inventory system used. Perpetual inventory updates balances continuously, while periodic inventory determines cost of sales at reporting intervals.

For example, purchasing inventory for 5,000 and selling goods costing 2,000 leaves inventory worth 3,000, assuming no other transactions. Review valuation methods such as FIFO and weighted average, reconcile stock differences, and document damaged goods and returns. Try Cash Cloud for free to explore inventory, purchasing, sales, and accounting tools.