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Inventory Accounting and Costing Services in India

Reviewed by CA and CS Team, Patron Accounting LLP ICAI & ICSI Registered| 15+ Years Experience| Last Updated: 2 June 2026 Verify Credentials →

Scope: valuation, costing method, COGS, and physical stock reconciliation.

Fees: starting from INR 7,499 per month (Exl GST and Govt. Charges).

Standard: AS 2 and Ind AS 2 - lower of cost or net realisable value.

Best for: trading, manufacturing, retail, and e-commerce businesses.

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Talk to our inventory accounting team about AS 2 valuation, FIFO or weighted average costing, COGS, and stock reconciliation.

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What This Service Covers: A Quick Overview

📌 TL;DR - Inventory Accounting Services at a Glance

Inventory accounting and costing values your stock, computes cost of goods sold, and reconciles books to physical counts. Under AS 2, inventory is valued at the lower of cost or net realisable value using FIFO or weighted average, never LIFO. It starts from INR 7,499 per month.

ParameterDetail
What it isValuing stock and computing COGS accurately
StandardAS 2 / Ind AS 2 - lower of cost or NRV
MethodsFIFO or weighted average (LIFO not permitted)
Applicable toTrading, manufacturing, retail, e-commerce
CostFrom INR 7,499 per month (Exl GST)
Key outputInventory value, COGS, stock reconciliation

Inventory accounting and costing services keep your stock value and margins accurate and compliant. Patron Accounting has supported over 10,000 businesses across India and works on Tally, Zoho Books, QuickBooks, and Xero.

We handle inventory valuation under AS 2, costing by FIFO or weighted average, COGS computation, and stock reconciliation for trading, manufacturing, and retail businesses.

Content is reviewed quarterly for accuracy.

What Is Inventory Accounting?

Inventory accounting is the process of recording, valuing, and reporting the stock a business holds, and computing the cost of goods sold when it is sold. It directly drives gross margin, the balance sheet, and the tax position.

Under Accounting Standard 2 (and Ind AS 2), inventories must be valued at the lower of cost or net realisable value. Cost includes purchase, conversion, and other costs of bringing stock to its present location and condition, while net realisable value is the estimated selling price less completion and selling costs.

Key Terms for Inventory Accounting:

  • COGS: cost of goods sold - the cost of inventory recognised as an expense on sale.
  • NRV: net realisable value - estimated selling price less completion and selling costs.
  • FIFO: first-in, first-out - oldest stock is assumed sold first.
  • Weighted average: a single average cost per unit across all stock.
APL-05 Inventory Accounting
From INR 7,499/mo AS 2 Valuation

Who Needs Inventory Accounting and Costing?

Any business that holds stock needs accurate inventory accounting, since it shapes profit, taxes, and lending decisions.

  • Trading and wholesale businesses managing high-volume stock.
  • Manufacturers tracking raw materials, work in progress, and finished goods.
  • Retail and e-commerce sellers across multiple channels and SKUs.
  • Businesses preparing for audit, lending, or investor due diligence.

Compliance note: under AS 2 and Ind AS 2, the chosen costing method must be applied consistently year to year, and any change must be disclosed in the financial statements as a change in accounting policy.

Our Inventory Accounting and Costing Services

ServiceWhat We Do
Inventory valuationValuing stock at the lower of cost or NRV under AS 2.
Costing method setupApplying FIFO or weighted average consistently.
COGS computationAccurate cost of goods sold and gross margin.
Stock reconciliationMatching book stock to physical counts and resolving variances.
NRV write-downsIdentifying and recording write-downs to net realisable value.
Landed cost allocationApportioning freight, duties, and handling into cost.
Our Process

The 6-Step Inventory Costing Process

A clear, repeatable process that captures your stock data, applies a consistent costing method, computes COGS, tests against NRV, and reconciles to physical counts.

Step 1

Capture stock data

We gather purchases, production, sales, and opening stock records so the costing has a complete base.

Records gathered Opening stock
Data Captured 01
Step 2

Apply the costing method

We value movements using FIFO or weighted average, applied consistently under AS 2.

FIFO or WAC Consistent
Method Applied 02
Step 3

Allocate landed costs

We distribute freight, duties, and handling into item cost so valuation reflects true cost.

Freight and duties Into item cost
Landed Cost Allocated 03
Step 4

Compute COGS

We calculate cost of goods sold and the closing inventory value for the period.

COGS computed Closing value
COGS Computed 04
Step 5

Test against NRV

We compare cost to net realisable value and write down where NRV is lower, at item level.

NRV test Write-downs
NRV Tested 05
Step 6

Reconcile and report

We reconcile book stock to physical counts, resolve variances, and deliver the reports.

Stock reconciled Reports delivered
Reconciled and Reported 06

What We Need to Start

  • Opening stock and purchase records for the period.
  • Sales and production or job records.
  • Landed cost details - freight, duties, handling.
  • Physical stock count or warehouse data.
  • Current costing method and accounting software access.

Ask us for a free inventory costing checklist before kickoff.

What you receive: an inventory valuation report by item under AS 2; a COGS and gross margin statement for the period; a stock reconciliation with variance analysis; and an NRV write-down schedule where applicable.

Common Challenges and How We Solve Them

ChallengeImpactHow Patron Accounting Solves It
Book stock not matching physicalUnreliable stock value and marginsRegular reconciliation and variance resolution
Inconsistent or wrong costing methodDistorted profit and audit riskApply FIFO or weighted average consistently under AS 2
Obsolete stock carried at costOverstated assets, misled lendersTest against NRV and write down where required
Freight and duties not in costUnderstated cost and wrong marginsAllocate landed costs into item valuation

Inventory Accounting Fees in 2026

Fee ComponentAmount
Patron Accounting Professional FeesStarting from INR 7,499 per month (Exl GST and Govt. Charges)
Standalone market band (context)Rs 6,000 to Rs 12,000 per month
Manufacturing or multi-location costingCustom, quoted on scope after a free assessment

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

Professional service charges for drafting, filing, and representation are separate from the statutory fees. The exact fee depends on the complexity of the case, disputed amount, and number of hearings required. Contact us for a detailed quote.

Get a free Inventory Accounting consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

Turnaround Time

StageEstimated Timeline
First cycle (method selection and baseline reconciliation)About 1 week, depending on SKU count and data quality
Monthly inventory valuation and COGSWithin a few business days of complete stock data
Stock reconciliation and reportsOn a fixed monthly calendar

After setup, monthly inventory valuation and COGS are delivered within a few business days of receiving complete stock data. The first cycle, including method selection and a baseline reconciliation, typically takes about one week depending on SKU count and data quality.

Key Benefits

Benefits of Professional Inventory Costing

Accurate gross margin

True profitability by product, built on correct stock valuation and COGS.

AS 2-compliant valuation

Stock valued at the lower of cost or NRV so audits pass cleanly.

Early write-down detection

Shrinkage, obsolescence, and NRV write-downs surfaced before they distort books.

Reliable stock figures

Dependable inventory numbers for lending and investor decisions.

Why Businesses Trust Patron Accounting

10,000+ Businesses | 4.9 Google Rating | 50,000+ Documents Processed | 15+ Years

"Patron Accounting gives the best service related to all account handling of our firm. She files all returns timely and is most kind and respectful towards us." - Nikhil Nimbhorkar, Google Review

"I've had an outstanding experience working with Patron Accounting. Their professionalism, attention to detail, and timely communication made the entire process smooth and stress-free." - Subhendu Mishra, Google Review

Outcome proof: a trading client switched to a consistent weighted-average method and a monthly reconciliation, surfacing obsolete stock that had been overstated for two years.

With offices in Pune, Mumbai, Delhi, and Gurugram, Patron Accounting serves businesses across India - both in-person and remotely.

FIFO vs Weighted Average

FactorFIFOWeighted Average
Cost flowOldest stock costed firstSingle average cost per unit
Best forPerishables, fashion, dated stockHomogeneous, high-volume goods
Margin in rising pricesHigher reported profitSmoothed, averaged profit
India statusPermitted under AS 2Permitted under AS 2

Related Services

Inventory costing pairs with these closely related services. Note that LIFO is not permitted under AS 2, Ind AS 2, or IAS 2, so we apply only FIFO or weighted average. Explore:

Valuation Standard and Compliance

Inventory valuation in India follows Accounting Standard 2 and Ind AS 2, Valuation of Inventories, which require inventories to be measured at the lower of cost or net realisable value. Cost comprises purchase, conversion, and other costs of bringing stock to its present location and condition.

Permitted cost formulas are FIFO and weighted average; LIFO is not permitted under AS 2, Ind AS 2, or IAS 2. The net realisable value test is applied at the item level, and stock is written down where NRV falls below cost. The chosen method must be consistent year to year, with any change disclosed as a change in accounting policy and a clean stock reconciliation supporting audit.

For official guidance on AS 2 and Ind AS 2 inventory valuation, refer to the Ministry of Corporate Affairs (mca.gov.in).

Frequently Asked Questions

Real questions businesses ask about inventory costing methods, FIFO vs weighted average, LIFO, NRV, and fees.

What is inventory accounting?

Inventory accounting is the process of recording, valuing, and reporting the stock a business holds, and computing the cost of goods sold when stock is sold. It drives gross margin, the balance sheet, and the tax position. In India, inventory is valued under Accounting Standard 2 at the lower of cost or net realisable value.

What are the inventory costing methods?

The main inventory costing methods are FIFO (first-in, first-out), weighted average cost, and, in some frameworks, LIFO and specific identification. FIFO assumes the oldest stock is sold first, while weighted average applies a single average cost per unit across all identical items. The method must be applied consistently.

What is the difference between FIFO and weighted average?

FIFO costs the oldest stock first, so in periods of rising prices it reports higher profit and a more current closing inventory value. Weighted average applies one average cost per unit, smoothing the effect of price changes. Both are permitted in India; the right choice depends on your product type and how prices move.

Is LIFO allowed in India?

No. LIFO (last-in, first-out) is not permitted under Accounting Standard 2, Ind AS 2, or the international standard IAS 2. Indian businesses must value inventory using either FIFO or the weighted average cost method, applied consistently and disclosed in the financial statements.

What is net realisable value?

Net realisable value (NRV) is the estimated selling price of inventory in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Under AS 2, if NRV falls below cost, inventory is written down to NRV, and the test is applied at the individual item level.

Which businesses need inventory accounting and costing?

Any business that holds stock needs it, including trading and wholesale firms, manufacturers tracking raw materials, work in progress, and finished goods, and retail and e-commerce sellers managing many SKUs. Accurate inventory accounting is also essential before audits, lending, and investor due diligence.

How much do inventory accounting services cost in India?

Patron Accounting inventory accounting and costing starts from INR 7,499 per month (Exl GST and Govt. Charges). Across the market, standalone valuation and stock reconciliation typically range from Rs 6,000 to Rs 12,000 per month, depending on SKU count, volume, and whether manufacturing costing is involved. You receive a fixed quote after a free assessment.

Can you work with our existing accounting software?

Yes. We perform inventory valuation, costing, and stock reconciliation within Tally, Zoho Books, QuickBooks, and Xero, or from your stock and purchase data. We set up a consistent costing method and deliver monthly valuation, COGS, and reconciliation reports.

Stock valuation aur costing kaise karwayein business ke liye?

Aap apna opening stock, purchases, sales, aur landed cost details share kijiye. Hum AS 2 ke hisaab se FIFO ya weighted average se valuation, COGS, aur physical stock reconciliation karke monthly reports dete hain. Free review ke liye call kijiye.

Quick Answers

  • Starting price? INR 7,499 per month (Exl GST).
  • Standard? AS 2 - lower of cost or NRV.
  • Methods? FIFO or weighted average (no LIFO).
  • Key output? Valuation, COGS, stock reconciliation.
  • Software? Tally, Zoho Books, QuickBooks, Xero.

Why Acting Now Matters

Wrong inventory valuation distorts gross margin, profit, and tax, and an auditor can qualify the report if AS 2 is not followed. Obsolete stock carried at cost overstates assets and misleads lenders and investors. Getting valuation and reconciliation right each month keeps your books true and fair and your decisions grounded in real numbers.

Get a free, no-obligation quote. Call +91 945 945 6700 or WhatsApp our team today.

Value Your Stock Right, Every Month

Inventory is often the largest item on a trading or manufacturing balance sheet, so getting its value right matters. Patron Accounting values your stock under AS 2, applies a consistent costing method, computes COGS, and reconciles to physical counts.

The result is accurate margins, clean audits, and reliable numbers for every decision. Call +91 945 945 6700, WhatsApp us, or request a free consultation.

Book a Free Consultation - No Obligation.

Inventory Accounting Services Near You

On-the-ground support in major cities, plus remote service across India.

Pune
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Mumbai
Maharashtra
Delhi
NCR
Gurugram
Haryana
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Content Created: 2 June 2026  |  Last Updated: 2 June 2026  |  Next Review: 2 March 2027  |  Reviewed By: CA & CS Team, Patron Accounting LLP

This page is reviewed periodically for accuracy on accounting standards and service details (Freshness Tier 3).

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