Embedded Files
Issue: After splitting my company in Book Keeper software, my closing inventory quantity is correct, but
the inventory value under FIFO does not match with the original company file. Why does this
happen?
Reason: This difference is expected and correct behaviour under the FIFO (First In, First Out) inventory
valuation method after a company split. The mismatch occurs because the purchase history before
the split date is not carried forward, which directly affects FIFO cost calculation.
Detailed Explanation (With Example)
Let us understand this with a simple example.
Scenario in the Original Company File (Before Split)
Purchase entries recorded:
Date
Quantity
Rate
29-Dec-25
1
10
30-Dec-25
1
15
31-Dec-25
1
17
Total stock before sale = 3 qty
Now, on 01-Jan-26, you record a sale of 1 qty.
FIFO Calculation in Original File:
As per FIFO, the oldest stock is sold first
Item sold is from 29-Dec-25 @ ₹10
Remaining stock:
30-Dec-25 → 1 qty @ ₹15
31-Dec-25 → 1 qty @ ₹17
Closing Stock (01-Jan-26):
Quantity: 2
Average value shown: ₹16
Total value: ₹32
This is correct in the original company file because the complete purchase history is available.
Scenario After Company Split (Split Date: 01-Jan-26)
When you split the company:
Book Keeper does not carry forward individual purchase lots
Only the opening stock quantity and value are brought into the new file
FIFO layers before the split date no longer exist
Assume opening stock in split file:
Quantity: 3
Value: ₹42
Effective rate: ₹14 per unit
Now, on 01-Jan-26, you record the same sale of 1 qty.
FIFO Calculation in Split File:
FIFO now works only on the opening stock
Cost of item sold = ₹14 (opening stock rate)
Remaining stock:
2 qty @ ₹14
Closing Stock (01-Jan-26) in Split File:
Quantity: 2
Rate: ₹14
Total value: ₹28
Why the Difference Occurs
File type
Closing quantity
Closing Value
Original company
2
32
Split company
2
28
This difference happens because:
FIFO valuation depends on purchase sequence
After split, older purchase layers are not available
FIFO restarts based on opening stock in the new file
Hence, cost of goods sold and closing value change
Is This an Error?
No. This is not a bug or data issue.
This is normal, logical, and technically correct behaviour under FIFO when:
A company is split
Historical purchase data is not carried forward
Opening stock is treated as a single FIFO layer
Important Note for Users
Stock quantity will always remain correct
Inventory value may differ under FIFO
This behaviour applies only to FIFO method
Average or Weighted Average valuation may show different behaviour
Recommendation
If you rely heavily on exact historical FIFO valuation across financial years, avoid comparing
inventory values between:
Original company file
Split company file
Both are correct within their own accounting context.
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