Zoho Books Introduces Weighted Average Cost: Simplify Your Inventory Valuation

Zoho Books Introduces Weighted Average Cost: Simplify Your Inventory Valuation Big news for Zoho Books users— Weighted Average Cost (WAC) is now available as an inventory valuation method! This long-awaited update is a game-changer for businesses that need more options to align inventory valuation with their accounting practices. Why is WAC Important? For years, Zoho Books users were limited to the FIFO method, but now, with the introduction of WAC: - Businesses can better manage inventory costs, especially when prices fluctuate. - You can choose the valuation method—FIFO or WAC—that fits your business strategy. - Even more exciting, you can set different valuation methods for different items during setup. This feature is already live, even though the official announcement is still pending. Here’s everything you need to know about how WAC works. How the Weighted Average Cost (WAC) Is Calculated The **Weighted Average Cost** method calculates the total value of available quantities and divides it by the total quantity available. In simple terms: WAC Formula: \[ WAC = \frac{\text{Total Value of Inventory}}{\text{Total Quantity Available}} \] ### **Example Calculation** #### 1. Initial Transaction | Transaction | Quantity | Unit Price (BCY) | |-------------|----------|------------------| | Purchase | 1 | 10 | | Purchase | 2 | 20 | #### 2. Weighted Average Costing (WAC) Calculation \[ WAC = \frac{(1 \times 10) + (2 \times 20)}{1 + 2} = 16.67 \] This means every unit of stock is now valued at **16.67**. #### 3. Sales Transaction | Transaction | Quantity Sold | Weighted Average Costing (WAC) | Remaining Stock | Remaining Value (BCY) | |-------------|---------------|---------------------------------|-----------------|------------------------| | Sales | 1 | 16.6667 | 2 | 31.34 | --- ## **Moving Average Costing: How WAC Updates with New Stock** With **Moving Average Costing** (also called Perpetual Average), the WAC is recalculated every time you add new stock. Here’s an example of how this works: #### 1. New Transactions | Transaction | Quantity | Unit Price (BCY) | |-------------|----------|------------------| | Purchase | 1 | 5 | #### 2. Updated WAC \[ \text{Updated WAC} = \frac{(2 \times 16.67) + (1 \times 5)}{2 + 1} = 12.78 \] #### 3. Sale After Update | Transaction | Quantity Sold | Weighted Average Costing (WAC) | Remaining Stock | Remaining Value (BCY) | |-------------|---------------|---------------------------------|-----------------|------------------------| | Sales | 1 | 12.78 | 2 | 25.56 | --- Learn Zoho Books the Smart Way At Cloud Books Academy, we’re committed to helping you make the most of Zoho Books, whether you’re just starting out or want to dive deeper into its advanced functionalities. Upcoming Workshop Details 📅 **Dates**: January 23–25, 2025 ⏰ **Time**: 10 AM–12 PM IST 🖥️ **Format**: Online (Live Interactive Sessions) This 3-day workshop will cover everything you need to know about Zoho Books, including how to effectively use the new WAC feature for your business. Whether you're an accountant, business owner, or entrepreneur, this workshop is the perfect opportunity to upskill and streamline your accounting processes. **Ready to join?** DM or WhatsApp **+91 8446522037** for more details and to register. Let’s make accounting smarter and simpler—together!