Today we will discuss how to do setting of stock valuation to adjust gross profit in ERP software.
Let us see formula for calculation of gross profit.
GROSS PROFIT = (Total sale value + Closing stock value) – (Total purchase value + Opening stock value)
Now we will discuss a technique through which you can easily adjust your stock value and gross value.
There are two options of closing stock.
1. Manual
2. Automatic
If you are selecting manual option then software will prompt you to input closing stock value of each month manually.
You can manually input total stock value in trading account by double clicking on closing stock. Thus your profit will be calculated on this stock value.
In case if you select automatic option, then closing stock value will be calculated according to item valuation price. Item valuation price decide that according to which price closing stock will be calculated.
You can do stock valuation according to sale price, basic price, purchase price and self value in the item master.
Otherwise you can also do stock valuation according to average purchase price.Thus stock value will vary with the item wise valuation option. This is the value which results in variation of profit and stock.
For eg. If you select sale price option in item wise valuation field then your closing stock value will increase.
But, if you select average purchase price in item wise valuation field then stock value will decrease. That result in less profit.
Now we will check it’s effect on stock value.
Firstly select sale price in item wise valuation.Then you can check the closing stock and gross profit according to sale price.
Thus in trading account software will display the closing stock and gross profit according to sale price. Now to check detailed closing stock double click the closing stock.
Thus in ERP software trading account will display stock report i.e. closing stock, closing value, opening value and stock, purchase value etc.
Now we will check closing stock according to average purchase value. Select average purchase price in item wise valuation field.
Now you will see in the trading account the value of closing stock and gross loss is different from the previous case.
Now we will discuss most popular formula of stock valuation calculation.
It is opening + Average + Opening option in item wise valuation field. It is also known as 3D formula of stock valuation. Because the software calculate the stock value on opening stock, Average purchase price and self value.