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Inventory & Valuation Architecture

FIFO Costing, Valuation & Warehouse Transfers

Compliant with Indian Accounting Standard 2 (AS-2) and Ind AS 2. Discover how Katixo's high-performance FIFO costing engine opens cost lots, calculates real-time Cost of Goods Sold (COGS), and maintains cost basis integrity across inter-warehouse stock transfers.

1. Module Overview: Why FIFO Costing is Essential

Under Indian tax and accounting standards, enterprises cannot arbitrarily estimate stock valuation.First-In, First-Out (FIFO) assumes that items purchased earliest are sold earliest. In a rising price environment, FIFO accurately matches historical procurement costs with sales revenues:

AS-2 Statutory Compliance

Audit-ready inventory valuation backed by granular lot-by-lot acquisition and consumption records.

Accurate Gross Profit

Eliminates false profit spikes caused by using outdated purchase prices or un-weighted averages.

Pessimistic Concurrency

Row-level database locking ensures multiple concurrent dispatches cannot oversell or double-consume lots.

2. How the FIFO Engine Operates Under the Hood

A. Cost Lot Opening (Every Inbound Receipt)

Whenever stock enters a warehouse — whether via a Goods Receipt Note (GRN), direct Purchase Bill, or positive physical stock count — Katixo opens an immutable cost_lot record:

• Lot ID: UUID

• Item: Paracetamol 650mg | Warehouse: Main Depot

• Opening Qty: 100 units | Remaining Qty: 100 units

• Landed Unit Cost: ₹42.50 | Total Lot Value: ₹4,250.00

B. Lot Consumption (Oldest-First Draw with Blended Cost)

When a sales issue occurs (Delivery Challan dispatch, POS cash sale, or direct invoice), the FIFO engine queries active open lots ordered by created_at ASC:

Numerical Example:

Suppose an order requires 15 units. Active open lots are:

  • Lot 1 (Oldest): 10 units remaining @ ₹100.00 each
  • Lot 2 (Newer): 20 units remaining @ ₹120.00 each

Engine consumes all 10 units from Lot 1 (₹1,000) + 5 units from Lot 2 (₹600).
Total COGS = ₹1,600.00 | Blended FIFO Unit Cost = ₹106.67.

C. General Ledger COGS Posting

When the Sales Invoice is posted, the accounting posting rule credits Inventory Asset (1200) and debits Cost of Goods Sold (5000) using this exact blended FIFO cost basis.

3. Inter-Warehouse Transfers & Cost Preservation

Transferring inventory between branches (e.g. Central Warehouse to a City Van Hub) must never alter the company's total inventory asset value:

  1. 1
    Create Transfer Order: Go to Inventory > Transfer Orders > "New Transfer Order". Select Origin Warehouse and Destination Warehouse. Add item lines and batch numbers.
  2. 2
    Dispatch (TRANSFER_OUT): Warehouse staff pack items and click Dispatch. Origin stock is deducted and items enter IN_TRANSIT. The original FIFO acquisition cost is carried forward on the transfer order line.
  3. 3
    Receive at Destination (TRANSFER_IN): Destination warehouse verifies the goods and clicks Receive. Katixo opens a new FIFO cost lot at the destination warehouse carrying the identical original cost basis. Zero valuation distortion occurs.

4. Valuation Reports & Balance Sheet Synchronization

Two standard reports provide full audit visibility into stock valuations:

FIFO Lot Valuation Report

Lists every active, unconsumed cost lot in your organization with receipt date, original quantity, remaining quantity, unit cost, and current balance sheet value.

/api/v1/reports/fifo-valuation

Stock Summary Report

Aggregated view per item across all warehouses. For FIFO organizations, values are derived directly from the sum of active cost lots.

/api/v1/reports/stock-summary

Developer & API Integration Reference

JWT Bearer Required

Transfer order and valuation endpoints for automated inventory pipelines:

GET/api/v1/transfer-orders
POST/api/v1/transfer-orders
POST/api/v1/transfer-orders/{id}/dispatch
POST/api/v1/transfer-orders/{id}/receive
GET/api/v1/reports/fifo-valuation