For many people it is important to be able to represent the market value of inventory on a balance sheet. Even though GAAP (generally accepted accounting principles) suggests people use the cost basis to value their inventory, lenders typically prefer to see market value for inventory as a measure of business liquidity and collateral.
For produced inventory, such as farm-raised commodities, some people account for their inventory at market value right at the time of production, which Ambrook supports. You can read more about the handling of those inventory types here.
Ambrook also supports the preparation of market value balance sheets directly from the app, even for inventory that was purchased and has a clear cost basis.
To run a market value report, you can go to the Exports page and select Market Value Report from the Items section.
The report preview screen will show:
An Account Balance column that shows your complete balance sheet with the book values for each account
A Quantity column which shows the quantity on hand of any inventory items
A Unit Price column which shows the current average price per unit for your inventory accounts, but can be updated to reflect the current market value of any items.
A Market Value column which shows the impact of any changes you make to the unit price.
Tip - Market values can be entered for any asset, not just inventory, so this includes assets such as land or equipment. This can be useful for a quick report, but you should always check with your accountant to make sure that booking depreciation or land appraisal value isn’t the better thing to do instead. |
Updating the unit price of your items for the market value report has no actual impact on your underlying books. The Market Value export will use the market value for all your accounts, and any difference between the book and market values will be captured in an equity account called Change in Market Value.
The market values you enter will be saved for the next time you run the report, but you can always update them to reflect the current market rates of your inventory.