If you are new to Ambrook, or new to tracking inventory in your accounting software, you may be setting up your inventory accounts in the middle of the fiscal year. In this case you might have had a number of inventory-related transactions already happen over the course of the year, either purchase and/or sales.
To keep correct books, you have two options:
Setup your inventory with quantities on hand at the beginning of the year (assuming you can determine that information) and retag all the relevant transactions
Figure out the latest count of inventory you do have - maybe the last monthly close, generally sometime in the middle of the year - and set the initial quantities up for that date. You only need to worry about “tagging” inventory related transactions correctly going forward.
Either option is fine, the tradeoff is around how far back in time you want to re-tag previous transactions.
If you are a cash basis filer, this won’t impact your taxes, just your managerial books. If you are an accrual basis filer then starting your inventory off at the beginning of a fiscal year might make more
In both cases, if you set a non-zero initial quantity you can review this article [LINK] for details on clearing any Opening Balance Equity.
If you do option #2 from above, starting with a quantity on hand as of the middle of the year, you should review your prior inventory-related transactions during the year to check how they were categorized:
If they were tagged with expense categories, then any inventory you used up already will be properly reflected in your Profit & Loss statement.
If they were tagged as adjustments to a previous inventory account, you may be double counting inventory on your balance sheet by using an initial quantity. We recommend re-tagging these with expense categories, but if you have questions reach out to our support team or your financial professional