{"id":27969,"date":"2025-02-14T06:47:43","date_gmt":"2025-02-14T11:47:43","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/?p=27969"},"modified":"2025-03-31T04:27:21","modified_gmt":"2025-03-31T08:27:21","slug":"inventory-accounting","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-us\/blog\/inventory-accounting\/","title":{"rendered":"Understanding inventory accounting: A guide to the top methods and software\u00a0"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-us\/blog\/category\/accountants\/\" class=\"entry-header__link\">Accountants<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tUnderstanding inventory accounting: A guide to the top methods and software\u00a0\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-02-14T06:47:43-05:00\">February 14, 2025<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"Understanding inventory accounting: A guide to the top methods and software\u00a0\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-us\/blog\/inventory-accounting\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n\t<\/header>\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-us\/blog\/author\/yassirmalik\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2024\/03\/Yassir-Malik.jpg\" class=\"entry-author__image\" alt=\"yassir-malik-profile-picture\" \/>\t\t\t\t<span class=\"entry-author__name\">Yassir Malik<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<p>Accurate inventory accounting is a crucial part of your company\u2019s financial management. <\/p>\n\n\n\n<p>Keeping a close eye on how much stock you have\u2014and how quickly it\u2019s moving\u2014helps you make smart, data-driven decisions that can significantly affect your bottom line.&nbsp;<\/p>\n\n\n\n<p>But it can feel challenging to get a handle on all the details, especially for smaller business owners who might not have a dedicated accounting expert on board.&nbsp;<\/p>\n\n\n\n<p>This article explains the basics of inventory accounting and how it works. <\/p>\n\n\n\n<p>We\u2019ll look at the different methods of accounting for inventory, define key terms, and highlight the benefits you can expect from effective inventory management in your business.&nbsp;<\/p>\n\n\n\n<p>Here\u2019s what we\u2019ll cover:&nbsp;<\/p>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-what-is-inventory-accounting-nbsp\" data-level=\"2\">What is inventory accounting?&nbsp;<\/a><\/li><li><a href=\"#h-what-are-the-accounting-rules-for-inventory-and-stock-in-the-us-nbsp\" data-level=\"2\">What are the accounting rules for inventory and stock in the US?&nbsp;<\/a><\/li><li><a href=\"#h-what-is-gaap-nbsp\" data-level=\"2\">What is GAAP?&nbsp;<\/a><\/li><li><a href=\"#h-main-inventory-accounting-methods-nbsp\" data-level=\"2\">Main inventory accounting methods &nbsp;<\/a><\/li><li><a href=\"#h-understanding-inventory-costing-nbsp\" data-level=\"2\">Understanding inventory costing &nbsp;<\/a><\/li><li><a href=\"#h-cost-of-goods-sold-cogs-nbsp\" data-level=\"2\">Cost of goods sold (COGS)&nbsp;<\/a><\/li><li><a href=\"#h-how-to-record-inventory-and-cost-of-goods-sold-nbsp\" data-level=\"2\">How to record inventory and cost of goods sold&nbsp;<\/a><\/li><li><a href=\"#h-advantages-of-inventory-accounting-nbsp\" data-level=\"2\">Advantages of inventory accounting&nbsp;<\/a><\/li><li><a href=\"#h-keep-your-business-on-track-with-inventory-management-nbsp\" data-level=\"2\">Keep your business on track with inventory management&#8239;&nbsp;<\/a><\/li><\/ul><\/div>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Practical steps to harness AI for a more human-centered practice<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>How to win back time and enhance value for clients.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-6d9a64e9-5a50-4d2a-aadf-76822f5d3ea8\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/08\/BrandShootLDN_Jul2022_TechSoftware_0620-1440x810.jpeg\" class=\"single-cta__image\" alt=\"A person giving a presentation to colleagues.\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/08\/BrandShootLDN_Jul2022_TechSoftware_0620-1440x810.jpeg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-inventory-accounting-nbsp\">What is inventory accounting?&nbsp;<\/h2>\n\n\n\n<p>Inventory accounting is the process of tracking and recording the value of your company\u2019s goods and materials for financial reporting and management purposes.&nbsp;<\/p>\n\n\n\n<p>Inventory covers anything your business holds for resale or production at the end of an accounting period, including both finished products and raw materials. <\/p>\n\n\n\n<p>Because these items have value, they need to be accounted for just like the rest of your finances. <\/p>\n\n\n\n<p>In general, inventory falls into three categories:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Raw materials: <\/strong>The basic materials used in production&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Work-in-Progress (WIP): <\/strong>Items that are partway through the production process&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Finished goods:<\/strong> Completed products ready to sell.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>On your balance sheet, inventory is an asset because it\u2019s expected to convert to cash (or be used up) within a year. <\/p>\n\n\n\n<p>However, one of the main challenges in inventory accounting is working out how to value your stock accurately. <\/p>\n\n\n\n<p>Shifts in market demand, consumer preferences, or even inflation can affect the worth of your products.&nbsp;<\/p>\n\n\n\n<p>For instance, if the cost of materials changes over time\u2014say components go from $10 each to $12 each mid-year\u2013you need a clear method for assigning value to your inventory. <\/p>\n\n\n\n<p>Proper accounting and valuation methods help make sure your financial statements always reflect the true value of your assets.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-are-the-accounting-rules-for-inventory-and-stock-in-the-us-nbsp\">What are the accounting rules for inventory and stock in the US?&nbsp;<\/h2>\n\n\n\n<p>To keep things accurate, you need to follow recognized standards. <\/p>\n\n\n\n<p>In the US, GAAP (Generally Accepted Accounting Principles) allows different ways to assign value to inventory, including FIFO, LIFO, and WAC.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">First in, first out (FIFO)&nbsp;<\/h3>\n\n\n\n<p>The first in, first out (<a href=\"https:\/\/www.sage.com\/en-us\/blog\/glossary\/what-is-fifo-method-in-accounting-and-why-is-it-important\/\" target=\"_blank\" rel=\"noreferrer noopener\">FIFO<\/a>) method assumes that the first goods you acquire will be the first ones sold. <\/p>\n\n\n\n<p>This often aligns with how many businesses naturally operate\u2014especially those dealing with perishable goods.&nbsp;<\/p>\n\n\n\n<p>In many cases, this reflects how the flow of business works anyway. <\/p>\n\n\n\n<p>If you run a company that supplies perishable goods such as fresh food, it\u2019s the only logical way to operate. <\/p>\n\n\n\n<p>As your stock ages, it will spoil, so selling the oldest stock first makes sense.&nbsp;<\/p>\n\n\n\n<p>For example, if you run a business making fruit baskets, you might:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Buy 200 dragon fruits at $2 each (Day 1)&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Buy another 200 dragon fruits at $2.50 each (Day 2)&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Sell 200 dragon fruits on Day 3&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>With FIFO, the cost of goods sold would be $400 (200 x $2), and the total $500 from the second batch would remain in your ending inventory.&nbsp;<\/p>\n\n\n\n<p>Even for non-perishable stock, FIFO often gives a more accurate picture of your company\u2019s finances because it uses recent purchase costs for inventory valuation.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Last in, first out (LIFO)&nbsp;<\/h3>\n\n\n\n<p>Not all businesses use FIFO. Some choose last in, first out (LIFO), which assumes that the most recently purchased items are sold first. <\/p>\n\n\n\n<p>This can add complexity because you need to track older stock that isn\u2019t considered \u201csold\u201d yet.&nbsp;<\/p>\n\n\n\n<p>However, LIFO can sometimes reduce your tax liability in an inflationary environment by showing higher costs for goods sold, which lowers your reported profit. <\/p>\n\n\n\n<p>Keep in mind that while LIFO is allowed under GAAP in the US, it\u2019s not permitted under IFRS, the rules many other countries follow.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Weighted average cost (WAC)&nbsp;<\/h3>\n\n\n\n<p>Using the weighted average cost (WAC) method involves calculating an average unit cost based on all purchases:&nbsp;<\/p>\n\n\n\n<p><strong><em>WAC per unit = (beginning inventory value + purchases)\/ total number of units in inventory<\/em>&nbsp;<\/strong><\/p>\n\n\n\n<p>This gives different results depending on whether you use a <strong>periodic <\/strong>inventory system or a <strong>perpetual<\/strong> inventory system.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Periodic inventory system:<\/strong> You count inventory at the end of a period and apply product costs to find your ending inventory and cost of goods sold (COGS).&nbsp;<\/li>\n\n\n\n<li><strong>Perpetual inventory system:<\/strong> You continuously track inventory and COGS in real-time. This is often called the \u201cmoving average cost\u201d method.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>The WAC method is permitted under both the GAAP and IFRS accounting rules.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-gaap-nbsp\">What is GAAP?&nbsp;<\/h2>\n\n\n\n<p><a href=\"https:\/\/www.sage.com\/en-us\/blog\/glossary\/generally-accepted-accounting-principles-gaap\/\" target=\"_blank\" rel=\"noreferrer noopener\">GAAP (Generally Accepted Accounting Principles)<\/a> is the set of standardized accounting rules in the U.S. that ensures financial statements are consistent and transparent across different companies and industries.\u202f&nbsp;<\/p>\n\n\n\n<p>Created by the Financial Accounting Standards Board (FASB), GAAP covers a wide range of accounting topics and is critical for preventing fraud, simplifying audits, and helping investors compare financial statements.\u202f&nbsp;<\/p>\n\n\n\n<p>Public companies must follow GAAP, and many private companies opt for it as well, especially if they want to maintain credibility with lenders or attract new investors.&nbsp;<\/p>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Practical steps to harness AI for a more human-centered practice<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>How to win back time and enhance value for clients.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-6d9a64e9-5a50-4d2a-aadf-76822f5d3ea8\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/08\/BrandShootLDN_Jul2022_TechSoftware_0620-1440x810.jpeg\" class=\"single-cta__image\" alt=\"A person giving a presentation to colleagues.\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/08\/BrandShootLDN_Jul2022_TechSoftware_0620-1440x810.jpeg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-main-inventory-accounting-methods-nbsp\"><strong>Main inventory accounting methods<\/strong>&nbsp;<\/h2>\n\n\n\n<p>There are two different methods of accounting: cash-based and accrual-based. <\/p>\n\n\n\n<p>The main difference between the two is the timing of when you record revenue and expenses.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-cash-basis-accounting-nbsp\"><strong>Cash basis accounting<\/strong>&nbsp;<\/h3>\n\n\n\n<p>In cash-basis accounting, transactions are recorded only when money changes hands\u2014when you receive or pay cash.\u202f&nbsp;<\/p>\n\n\n\n<p>It\u2019s straightforward and popular among very small businesses, but it can be misleading for inventory purposes. <\/p>\n\n\n\n<p>If you\u2019ve ordered raw materials worth $5,000 in Q1 but don\u2019t pay until Q2, your Q1 statements might look like you have an extra $5,000 you haven\u2019t actually spent yet.&nbsp;<\/p>\n\n\n\n<p>For this reason, cash-basis inventory accounting isn\u2019t recognized by many regulatory bodies (including GAAP) and can skew a company\u2019s financial picture.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-accrual-basis-accounting-nbsp\"><strong>Accrual basis accounting<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Accrual-basis accounting is more traditional and widely accepted for handling inventory. <\/p>\n\n\n\n<p>You record sales when they occur (even if the cash hasn\u2019t arrived yet) and expenses when they\u2019re incurred (even if you haven\u2019t paid them yet).\u202f&nbsp;<\/p>\n\n\n\n<p>This method offers a clearer picture of your financial health at any given moment and is essential for most businesses carrying significant levels of inventory.&nbsp;<\/p>\n\n\n\n<p>Cash-basis accounting is a reasonable option for small businesses such as cafes, where the goods are paid for at the point of sale. <\/p>\n\n\n\n<p>However, for manufacturers, e-commerce stores, wholesalers, or any other business that carries a lot of inventory, accrual-based accounting is the best choice.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-understanding-inventory-costing-nbsp\"><strong>Understanding inventory costing<\/strong>&nbsp;<\/h2>\n\n\n\n<p>To value your inventory on the balance sheet, you need to calculate its cost accurately, especially if goods go through multiple stages. <\/p>\n\n\n\n<p>A common formula looks like this:&nbsp;<\/p>\n\n\n\n<p><strong><em>Beginning inventory + net purchases\u2014cost of goods sold = ending inventory<\/em>&nbsp;<\/strong><\/p>\n\n\n\n<p>In other words, you start with the inventory you had at the beginning of the period, add any new materials, and then subtract the cost of goods sold to find your ending inventory.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-key-terms-and-formulas-in-inventory-accounting-nbsp\"><strong>Key terms and formulas in inventory accounting<\/strong>&nbsp;<\/h3>\n\n\n\n<p>We\u2019ve mentioned some of these before, but it\u2019s worth taking a moment to nail down some clear definitions of a few key terms in inventory accounting.\u202f&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Beginning inventory&nbsp;<\/strong><\/h4>\n\n\n\n<p>The beginning inventory is a measure of a company\u2019s inventory at the start of any given financial reporting period. <\/p>\n\n\n\n<p>You calculate it by adding up the value of any materials on hand that are used to make finished goods, all products that are in the middle of the manufacturing process, and any items the company has manufactured but not yet sold.&nbsp;<\/p>\n\n\n\n<p><strong><em>Beginning inventory = value of raw materials + products being made + products made but not yet sold<\/em>&nbsp;<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Ending inventory&nbsp;<\/strong><\/h4>\n\n\n\n<p>Similarly, ending inventory refers to the total inventory a company has at the end of the reporting period. <\/p>\n\n\n\n<p>To work this out, take the figure for the beginning inventory, add the value of the raw materials the company has purchased during the period, then subtract the cost of the goods sold.<\/p>\n\n\n\n<p>Note that the ending inventory becomes the beginning inventory of the following period.&nbsp;<\/p>\n\n\n\n<p><strong><em>Ending inventory = beginning inventory + net purchases\u2014cost of goods sold<\/em>&nbsp;<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Inventory turnover&nbsp;<\/strong><\/h4>\n\n\n\n<p>Inventory turnover measures how many times a company sells its entire inventory during a defined period (usually one year). <\/p>\n\n\n\n<p>In essence, it\u2019s an indicator of how fast a company manages to sell its stock. A low turnover suggests slow sales, while a high turnover indicates stock is selling fast.&nbsp;<\/p>\n\n\n\n<p>To calculate inventory turnover, work out the average inventory value by adding together your beginning inventory and ending inventory for the period, then divide by two. You then divide the cost of goods sold by this figure.&nbsp;<\/p>\n\n\n\n<p><strong><em>Inventory turnover = cost of goods sold \/ average value of inventory<\/em>&nbsp;<\/strong><\/p>\n\n\n\n<p>(where average inventory = (beginning inventory + ending inventory) \/ 2)&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-cost-of-goods-sold-cogs-nbsp\">Cost of goods sold (COGS)&nbsp;<\/h2>\n\n\n\n<p><a href=\"https:\/\/www.sage.com\/en-us\/blog\/glossary\/cost-goods-sold-cogs\/\" target=\"_blank\" rel=\"noreferrer noopener\">COGS<\/a>, also known as the cost of goods sold, includes all costs a company incurs to produce goods during the reporting period. <\/p>\n\n\n\n<p>This not only means the cost of any raw materials used to create the goods but also the cost of labor involved in making them. It doesn\u2019t include indirect expenses like marketing costs.&nbsp;<\/p>\n\n\n\n<p>To calculate COGS, take the value of the beginning inventory, add the net purchases for the period, and subtract the ending inventory. This is a rearrangement of the ending inventory formula.&nbsp;<\/p>\n\n\n\n<p><strong><em>COGS = beginning inventory + net purchases\u2014ending inventory<\/em>&nbsp;<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Inventory shrinkage&nbsp;<\/strong><\/h3>\n\n\n\n<p>An undesirable but common inventory expense is shrinkage. <\/p>\n\n\n\n<p>This occurs when a business has fewer products in stock than it should have, according to the inventory records.&nbsp;<\/p>\n\n\n\n<p>There can be a number of reasons why this happens:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>spoilage of perishable goods&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>damage that renders the stock unsaleable&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>human error&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>theft&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>Whatever the reason for inventory shrinkage, it\u2019s crucial to track it so you can make an allowance for it in the accounts. <\/p>\n\n\n\n<p>Simply express the difference between the actual inventory and the recorded inventory as a percentage of the recorded inventory.&nbsp;<\/p>\n\n\n\n<p><strong><em>Inventory shrinkage rate = 100 x (recorded inventory \u2212 actual inventory) \/ recorded inventory<\/em>&nbsp;<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Inventory write-off&nbsp;<\/h3>\n\n\n\n<p>Inventory write-off is the formal process of recognizing lost or damaged inventory in your accounts. <\/p>\n\n\n\n<p>It reduces your net profit by the value of the unsaleable or missing items.\u202f&nbsp;<\/p>\n\n\n\n<p>It\u2019s different from a write-down, which is when the value of inventory is reduced, but the stock can still be sold.&nbsp;<\/p>\n\n\n\n<p>This one doesn\u2019t have a formula as such because it\u2019s a process rather than a calculation. <\/p>\n\n\n\n<p>Here\u2019s how it works:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Step 1:<\/strong> Identify the damaged or missing inventory items in the stock.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Step 2:<\/strong> Calculate the value to assign to them by multiplying the unit cost by the number of missing items.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Step 3: <\/strong>Record the written-off inventory as an expense in a designated inventory write-off expense account.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Step 4:<\/strong> Update your inventory system to remove the unsaleable units.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Step 5:<\/strong> Debit the COGS on the balance sheet and credit the inventory write-off expense account. If it\u2019s a significant amount, you should also record it separately in the company\u2019s income statement.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>For completeness and in case of later auditing, make a note of the reason for the write-off.&nbsp;<\/p>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Practical steps to harness AI for a more human-centered practice<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>How to win back time and enhance value for clients.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-6d9a64e9-5a50-4d2a-aadf-76822f5d3ea8\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/08\/BrandShootLDN_Jul2022_TechSoftware_0620-1440x810.jpeg\" class=\"single-cta__image\" alt=\"A person giving a presentation to colleagues.\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/08\/BrandShootLDN_Jul2022_TechSoftware_0620-1440x810.jpeg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-record-inventory-and-cost-of-goods-sold-nbsp\">How to record inventory and cost of goods sold&nbsp;<\/h2>\n\n\n\n<p>Calculating the cost of goods sold vs. inventory is one thing, but it\u2019s also important to have an understanding of how to record them in the books.&nbsp;<\/p>\n\n\n\n<p>The key thing to remember is that before inventory is sold, it counts as an asset. <\/p>\n\n\n\n<p>Once the stock is sold, the cost of those goods becomes an expense. You then transfer this cost from the balance sheet to the income statement.&nbsp;<\/p>\n\n\n\n<p>Essentially, the cost of goods sold is set against the revenues the company brings in from the sale of those goods. <\/p>\n\n\n\n<p>When you deduct the cost of goods sold from net sales, you get the company\u2019s gross profit figure.&nbsp;<\/p>\n\n\n\n<p>For example, let\u2019s suppose a company sells copies of one specific book. <\/p>\n\n\n\n<p>We\u2019ll choose that to strip out any complications that might arise from a manufacturing process or having items that are kept as<a href=\"https:\/\/www.sage.com\/en-us\/blog\/glossary\/what-is-bulk-inventory\/\" target=\"_blank\" rel=\"noreferrer noopener\"> bulk inventory<\/a>; in this hypothetical case, identical goods are bought and then sold with no processing involved.&nbsp;<\/p>\n\n\n\n<p>Here\u2019s a very simplified example of how to record the inventory and COGS. <\/p>\n\n\n\n<p>We\u2019ll assume 10 books are sold during the first quarter of 2024, and the cost of the book rises over time.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Step \/ Date<\/strong>&nbsp;<\/td><td><strong>Number of books<\/strong>&nbsp;<\/td><td><strong>Unit cost<\/strong>&nbsp;<\/td><td><strong>Total cost<\/strong>&nbsp;<\/td><td><strong>Notes<\/strong>&nbsp;<\/td><\/tr><tr><td><strong>Beginning inventory (12\/31\/23)<\/strong>&nbsp;<\/td><td>10&nbsp;<\/td><td>$20&nbsp;<\/td><td>$200&nbsp;<\/td><td>&#8211;&nbsp;<\/td><\/tr><tr><td><strong>Purchase (Jan 2024)<\/strong>&nbsp;<\/td><td>10&nbsp;<\/td><td>$22&nbsp;<\/td><td>$220&nbsp;<\/td><td>&#8211;&nbsp;<\/td><\/tr><tr><td><strong>Purchase (Feb 2024)<\/strong>&nbsp;<\/td><td>15&nbsp;<\/td><td>$25&nbsp;<\/td><td>$375&nbsp;<\/td><td>&#8211;&nbsp;<\/td><\/tr><tr><td><strong>Purchased (Mar 2024)<\/strong>&nbsp;<\/td><td>10&nbsp;<\/td><td>$27&nbsp;<\/td><td>$270&nbsp;<\/td><td>&#8211;&nbsp;<\/td><\/tr><tr><td><strong>Subtotal: Goods available for sale<\/strong>&nbsp;<\/td><td>45&nbsp;<\/td><td>&nbsp;&#8211;&nbsp;<\/td><td>$1,065&nbsp;<\/td><td>Sum of all inventory on hand in Q1 ($200 + $220 + $375 + $270)&nbsp;<\/td><\/tr><tr><td><strong>Less: Books sold<\/strong>&nbsp;<\/td><td>&#8211;&nbsp;<\/td><td>&nbsp;&#8211;&nbsp;<\/td><td>&#8211;&nbsp;<\/td><td>In Q1, 10 books are sold. Under FIFO, these come from the oldest batch (cost = $20 each).&nbsp;<\/td><\/tr><tr><td><strong>COGS (10 units x $20)<\/strong>&nbsp;<\/td><td>10&nbsp;<\/td><td>$20&nbsp;<\/td><td>$200&nbsp;<\/td><td>This is the \u201cCost of Goods Sold\u201d transferred to the income statement.&nbsp;<\/td><\/tr><tr><td><strong>Ending inventory (01\/31\/24)<\/strong>&nbsp;<\/td><td>35&nbsp;<\/td><td>&#8211;&nbsp;<\/td><td>$865&nbsp;<\/td><td>$1,065 (available)\u2014$200 (COGS) = $865 remains on the balance sheet as an asset&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>If you sell each book for $30, your total revenue on the 10 books sold in Q1 is $300 (10 x $30). <\/p>\n\n\n\n<p>Subtracting the $200 COGS (from the FIFO batch) leaves you with a gross profit of $100 for that period.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-advantages-of-inventory-accounting-nbsp\">Advantages of inventory accounting&nbsp;<\/h2>\n\n\n\n<p>There are a number of advantages of inventory accounting, all connected to the fact that it provides clarity about the health of a business. <\/p>\n\n\n\n<p>Here are a few of the main ones:&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-reduces-the-risk-of-cash-flow-problems\"><strong>Reduces the risk of cash flow problems<\/strong><\/h3>\n\n\n\n<p>Tracking stock levels accurately means you won\u2019t allocate too much cash to excessive levels of inventory, so you can deploy any available cash more strategically.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-helps-optimize-profit-margins\"><strong>Helps optimize profit margins<\/strong><\/h3>\n\n\n\n<p> Keeping a close eye on inventory makes sure you\u2019re tracking costs accurately, helping to boost your profit margins.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-helps-maximize-sales\"><strong>Helps maximize sales<\/strong><\/h3>\n\n\n\n<p> When a particular product is selling fast, you can make sure to increase production or stock more so you don\u2019t miss out on potential sales.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-allows-for-accurate-write-offs\"><strong>Allows for accurate write-offs<\/strong><\/h3>\n\n\n\n<p>Inventory accounting lets you monitor shrinkage effectively so you can account for it accurately in your financial reporting.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-minimizes-storage-costs\"><strong>Minimizes storage costs<\/strong><\/h3>\n\n\n\n<p>If an item isn\u2019t selling well, you order less of it and don\u2019t have to pay as much to keep it in storage.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-improves-marketing-effectiveness\"><strong>Improves marketing effectiveness<\/strong><\/h3>\n\n\n\n<p><strong> <\/strong>When you track inventory accurately, you\u2019ll spot patterns in sales trends that can be helpful for creating more effective marketing campaigns.&nbsp;<\/p>\n\n\n\n<p>In addition to these benefits, there\u2019s a very simple reason why using inventory accounting is a good idea.<\/p>\n\n\n\n<p>It\u2019s imperative that companies know what assets they own for both tax and operational reasons.&nbsp;<\/p>\n\n\n\n<p>That can be a challenge. <\/p>\n\n\n\n<p>But it\u2019s one that\u2019s crucial to meet head-on. Luckily, there are some excellent tools available to help your business do just that.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-keep-your-business-on-track-with-inventory-management-nbsp\">Keep your business on track with inventory management\u202f&nbsp;<\/h2>\n\n\n\n<p>Track stock levels automatically and avoid problems with over or understocking with dedicated <a href=\"https:\/\/www.sage.com\/en-us\/accounting-software\/inventory-management\/\" target=\"_blank\" rel=\"noreferrer noopener\">inventory management software<\/a>.&nbsp;<\/p>\n\n\n\n<p>The software allows you to monitor inventory in real-time across multiple locations, automating regular tasks such as order processing and reordering. <\/p>\n\n\n\n<p>It\u2019s the best way to make sure you deliver to your customers on time, every time.&nbsp;<\/p>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to our Sage Advice Newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get our latest business advice delivered directly to your inbox.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-ab515c6e-7e90-4c2f-a67e-113872516e8b\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg\" class=\"single-cta__image\" alt=\"Working from home with tea in hand\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n<section class=\"more-topics alignfull has-grey-light-background-color wp-block-sage-post-topics\">\n\t<div class=\"container\">\n\t\t<div class=\"row\">\n\t\t\t<div class=\"col col-12 col-lg-4\">\n\t\t\t\t<h3 class=\"more-topics__title h2\">Browse more topics from this article<\/h3>\n\t\t\t<\/div>\n\t\t\t<div class=\"col col-12 col-lg-8\">\n\t\t\t\t<ul class=\"post-tags__list\">\n\t\t\t\t\t\t\t\t\t\t\t<li class=\"post-tags__item\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-us\/blog\/hub\/accountants\/\" class=\"post-tags__link button button--secondary\">\n\t\t\t\t\t\t\t\tAccountants\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t\t\t\t\t\t<li class=\"post-tags__item\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-us\/blog\/hub\/accounting-101\/\" class=\"post-tags__link button button--secondary\">\n\t\t\t\t\t\t\t\tAccounting 101\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t\t\t\t\t\t<li 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(min-width: 30em) 100vw, 100vw\" \/>\t\t\t\n\t\t\t\n\t\t\t\t\t<\/figure>\n\t<\/div>\n\n\t<div class=\"card-post__content\">\n\t\t\t\t\t<div class=\"card-post__label\">Recommended<\/div>\n\t\t\n\t\t\t\t\t<div class=\"card-post__meta\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-12-22T09:26:06-05:00\">December 22, 2025<\/time><\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"reading-time\">4 min read<\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\n\t\t<p class=\"card-post__title h3\">\n\t\t\t\t\t\t\t<a\n\t\t\t\t\tclass=\"card-post__title-link\"\n\t\t\t\t\thref=\"https:\/\/www.sage.com\/en-us\/blog\/fixed-asset-lifecycle-management-efficiency\/\"\n\t\t\t\t>\n\t\t\t\n\t\t\tStreamline your fixed asset lifecycle from acquisition to disposal\n\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/p>\n\n\t\t\n\t\t\t\t\t<p class=\"card-post__description\">\n\t\t\t\tSimplify every stage of fixed asset management with best practices that reduce manual work, improve accuracy, and keep your organization audit-ready.\t\t\t<\/p>\n\t\t\n\t\t\t<\/div>\n\n\t<\/article>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\n\t\t\t\t\t<div class=\"row related-posts__non-featured\">\n\t\t\t\t<div class=\"col col-12\">\n\t\t\t\t\t<h2 class=\"related-posts__heading related-posts__heading--more h4\">More on this Topic<\/h2>\n\t\t\t\t<\/div>\n\n\t\t\t\t\n\t\t\t\t\t<div class=\"col col-6 col-lg-3 card-grid__item\">\n\t\t\t\t\t\t<article\n\t\tclass=\"card-post related-post related-post-1 post-33655 post type-post status-publish format-standard has-post-thumbnail hentry category-accountants category-money-matters tag-accountants tag-accounting-101 tag-fixed-assets business_type-accountants industry-financial-services\"\n>\n\t\t\t<a\n\t\t\tclass=\"card-post__link\"\n\t\t\thref=\"https:\/\/www.sage.com\/en-us\/blog\/the-essential-guide-to-sub-ledger-accuracy-and-integration\/\"\n\t\t\t\t\t>\n\t\t\t<figure class=\"card-post__media\">\n\t\t\t\t\t\t\t<img decoding=\"async\" width=\"684\" height=\"384\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0968-684x384.jpg\" class=\"card-post__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0968-684x384.jpg 684w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0968-512x768.jpg 512w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2024\/10\/BrandShoot-LND_June2024_Financial-Services_0968-540x810.jpg 540w\" sizes=\"auto, (min-width: 48em) 250px, (min-width: 30em) 100vw, 100vw\" \/>\t\t\t\n\t\t\t\n\t\t\t\t\t<\/figure>\n\n\t\t\n\t\t\t\t\t<div class=\"card-post__meta\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-12-18T15:04:29-05:00\">December 18, 2025<\/time><\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"reading-time\">3 min read<\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\n\t\t<p class=\"card-post__title h5\">\n\t\t\tThe essential guide to sub-ledger accuracy and integration\t\t<\/p>\n\n\t\t\t<\/a>\n\t\n\t\n\t\t\n\t\n\t<\/article>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t<div class=\"col col-6 col-lg-3 card-grid__item\">\n\t\t\t\t\t\t<article\n\t\tclass=\"card-post related-post related-post-2 post-33184 post type-post status-publish format-standard has-post-thumbnail hentry category-accountants 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\/>\t\t\t\n\t\t\t\n\t\t\t\t\t<\/figure>\n\n\t\t\n\t\t\t\t\t<div class=\"card-post__meta\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-11-17T09:52:30-05:00\">November 17, 2025<\/time><\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"reading-time\">4 min read<\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\n\t\t<p class=\"card-post__title h5\">\n\t\t\tMindful fixed asset reporting: Best practices for cleaner reconciliations\t\t<\/p>\n\n\t\t\t<\/a>\n\t\n\t\n\t\t\n\t\n\t<\/article>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t<div class=\"col col-6 col-lg-3 card-grid__item\">\n\t\t\t\t\t\t<article\n\t\tclass=\"card-post related-post related-post-3 post-13397 post type-post status-publish format-standard has-post-thumbnail hentry category-accountants category-free-guides-templates 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0-.537.216.74.74 0 0 0-.223.535.76.76 0 0 0 .223.535.74.74 0 0 0 .537.216h3c.699 0 1.25.551 1.25 1.25v7a1.24 1.24 0 0 1-1.25 1.25H5.75a1.24 1.24 0 0 1-1.25-1.25v-7c0-.699.551-1.25 1.25-1.25h3a.76.76 0 0 0 .537-.216.74.74 0 0 0 .223-.535.76.76 0 0 0-.223-.535.75.75 0 0 0-.537-.216z\" \/><\/svg>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-09-24T15:43:15-04:00\">September 24, 2025<\/time><\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"card-post__meta-text\"><span class=\"reading-time\">5 min read<\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\n\t\t<p class=\"card-post__title h5\">\n\t\t\t5 steps to mastering revenue recognition for SaaS\t\t<\/p>\n\n\t\t\t<\/a>\n\t\n\t\n\t\t\n\t\n\t<\/article>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t<div class=\"col col-6 col-lg-3 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h5\">\n\t\t\tUnderstanding SaaS compliance: Best practices for accounting and reporting\t\t<\/p>\n\n\t\t\t<\/a>\n\t\n\t\n\t\t\n\t\n\t<\/article>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n<\/section>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Learn the basics of inventory accounting with our guide on how it works.\u00a0<\/p>\n","protected":false},"author":1774,"featured_media":25026,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"sage_hide_published_date":false,"sage_hide_read_time":false,"sage_hide_share_buttons":false,"footnotes":""},"categories":[158,43],"tags":[2,110,195,4,170,153,359],"business_type":[312],"lilypad":[],"context":[429],"industry":[58],"persona":[150,98,97],"imagine_tag":[222,209,468,434,233,230],"coauthors":[509],"class_list":["post-27969","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accountants","category-money-matters","tag-accountants","tag-accounting-101","tag-boss-your-business","tag-business-intelligence","tag-business-strategy","tag-growing-a-business","tag-grow-your-accounting-practice","business_type-accountants","industry-nonprofit"],"sage_meta":{"region":"en-us","author_name":"Yassir Malik","featured_image":"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2024\/09\/BrandShootLDN_Jul2022_TechSoftware_0285.jpg","imagine_tags":{"222":"Accountants","209":"Accounting","468":"Grow your business","434":"Large Business","233":"Medium Businesses","230":"Small business"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice US","distributor_original_site_url":"https:\/\/www.sage.com\/en-us\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/27969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/users\/1774"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/comments?post=27969"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/27969\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media\/25026"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media?parent=27969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/categories?post=27969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/tags?post=27969"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/business_type?post=27969"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/lilypad?post=27969"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/context?post=27969"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/industry?post=27969"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/persona?post=27969"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/imagine_tag?post=27969"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/coauthors?post=27969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}