Why is My Closing Inventory Value Different in the New Split Company File (FIFO Method)?

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: 

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

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.