Stock value in your P&L: consumption, not purchases

Buying forty cases of water in August does not make August a bad month. Using them across September and October does — a little each month. The platform charges stock when it is used, which is the only way the per-unit P&L can be right.

By the end of this page

You will understand why purchases and consumption are treated differently, what the P&L shows for stock, and how the month-end closing value is computed.

August, two waysCalculator

Bought in August ($ at cost) Used or sold in August ($ at cost) Stock value on 1 August ($)

charged to August's P&L (consumption)

$ stock value on 31 August (opening + bought − used)

$ August would look worse by, if purchases were expensed

Purchases move cash into stock; consumption moves stock into cost. The P&L only sees the second.

The rule

A purchase is a movement of cash into stock: the bank goes down, stock value goes up, the P&L does not move. Consumption — use in a clean, a sale, a damage write-off — moves stock into cost: stock value goes down, the P&L is charged at the cost remembered on the purchase lines, against the unit where it happened. A sale also credits the selling price.

What the P&L shows

Per unit: stock consumed at cost. For the building: the same, summed, plus a closing stock value line that is not an expense — it is what is on the shelves, and it belongs on the balance sheet your accountant keeps.

Why this matters per unit

If purchases were expensed, the month you restocked would be terrible and the next two would be free, and no unit could be compared to another. Charging consumption puts $4 of water on 2E in the month 2E's tenant drank it, which is the number that tells you whether 2E's minibar pays.

Assets

An aircon or a sofa is an asset: it goes into stock value when bought and stays there. It leaves when written off (damaged, disposed) or when marked capital, in which case your accountant depreciates it over its life. Assets never appear as consumption.

For the accountant. The pack's stock sheet shows opening, purchases, consumption, adjustments and closing for the month — the same four numbers in the calculator above. That is a cost-of-goods schedule, and it is what turns "stock" from a guess into a line they can book.

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← Damage at cost vs selling

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