Choose an inventory opening balances date if you've been using Xero for a while

If you've been using Xero for a while, you can choose a date in the past for your opening balances, or start from today.

Scenario 1 - Choose an opening balances date in the past

Mike's Bike Barn uses inventory items in Xero - these items are untracked. Mike's financial year end is 31 December. He performed an inventory count on that date. On 31 January Mike decides to convert most of his inventory items to tracked items. He wants to enter opening balances as at 1 January and have Xero track inventory from that date.

Mike has been using an account with the account type Current Asset to hold his inventory balance. He will keep using this account for inventory items he doesn't want to track.

To make sure that Xero records the tracked inventory opening balances and subsequent transactions correctly, on 31 January Mike:

  1. Sets up an inventory asset account to hold balances for tracked inventory items.

    Set up your inventory asset account

  2. Sets up a Cost of Goods Sold account.

    Set up your Cost of Goods Sold account

  3. Converts the inventory items he wants to start tracking to tracked inventory items.

    Convert untracked items to tracked items in inventory

  4. Enters the opening balances for the tracked items, choosing:

    • 1 January as the opening balances date.

    • The account with the account type Current Asset as the account which holds the value of his inventory.

      Image showing opening balances account selected.

    Enter opening balances for tracked inventory items

  5. Voids all transactions from 1 January which use the inventory items which have been converted to tracked items.

    Delete or void an invoice

    Delete or void a bill

    Delete or void a credit note

  6. Re-enters the voided transactions. Xero updates the tracked items' quantities and values on hand.

Instead of voiding and re-entering transactions, Mike could enter inventory adjustments to bring his tracked items' quantities and values on hand up to date as at 31 January. However, be aware that Mike won't be able to trace movements in inventory to particular transactions for this period if he uses this method.

Inventory adjustments

Scenario 2 - Choose today for your opening balances date

Mary's Floral Studio uses inventory items in Xero - these items are untracked. On 1 October Mary decides that she wants to start tracking some of her inventory items from today.

Mary has been using an account with the account type Current Asset to hold her inventory balance. She will keep using this account for inventory items she doesn't want to track.

On 1 October, Mary:

  1. Performs an inventory item count.

  2. Sets up an inventory asset account to hold balances for tracked inventory items.

    Set up your inventory asset account

  3. Sets up a Cost of Goods Sold account.

    Set up your Cost of Goods Sold account

  4. Converts the inventory items she wants to start tracking to tracked inventory items.

    Convert untracked items to tracked items in inventory

  5. Enters the opening balances for the tracked items, choosing:

    • 1 October as the opening balances date.

    • The account with the account type Current Asset as the account which holds the value of her inventory.

      Image showing opening balances account selected.

    Enter opening balances for tracked inventory items