A stock category groups items by their role in your business, finished goods, raw materials, work in progress, and links them to an accounting ledger, so the value of stock posts to the right account on the balance sheet. It is the bridge between what sits in the warehouse and what shows in the books.
- What the category types mean
- How a category carries accounting meaning
- How category, class and group differ
How it behaves
Role and ledger
A category is typed as Finished Goods, Work In Progress, Raw Materials or Indirect Raw Materials, and it points to a GL ledger. That link is the point: when stock is received or its value changes, the posting lands in the category's ledger, so your inventory on the balance sheet is split the way an accountant expects, finished goods apart from raw materials.
Three different axes
Category sits alongside two other labels, and they answer different questions. Category is financial (which account), class is handling (how to store and move), and group is status within a location (available, on hold). An item carries all three without overlap.
Edge cases and good practice
- Get the ledger right; it decides where stock value reports.
- Do not overload the category with handling meaning, that is what class is for.
Related
- How to: Categories and classes
- Reference: Chart of Accounts (the ledger it posts to)
- Reference: Stock Class