Inventory deals with the stock of goods available. Inventory management mainly consists of handling stock operations like moving stock from one warehouse to another, Purchases, Sales, Purchase Return, Sales Return, Issues, Adjustments and so on.
The main reason for handling Inventory management system is to know the actual goods available in the warehouse, quantity and cost of these items. This will also help us to know the fast moving and slow moving items and when it can be ordered. Inventory value is calculated based on Average cost.
Average Cost = (Purchase Quantity x Purchase Cost) + (Stock Quantity x Average Cost) / (Purchase Quantity x Stock Quantity)