Every stocked item carries a cost. When goods come in (a goods receipt, an opened bill, an increase adjustment, a finished work order) LedgersLab records a cost lot at that unit cost. When goods go out (a delivery, a delivered invoice, a decrease adjustment, material consumed in production) the cost released is worked out by the item category's costing method:
- AVCO (average cost) — the default. A running weighted average of what is on hand.
- FIFO (first in, first out) — the oldest lots are consumed first.
Items with no category, and categories set to Use the company default, follow Settings → Inventory → Items → Default costing method.
Returns (credit notes with Items returned to stock, vendor credits with Items returned to vendor) reverse the original lot at its original cost. Landed costs (Chapter 6) are added to the receiving lot. Running cost computation at Settings → Accounting → Accountant recomputes averages as each transaction posts.