Inventory

Inventory is the stock of physical goods a business holds for sale, production, or consumption. In Business Central and Dynamics 365 Supply Chain Management, every inventory transaction is recorded in the item ledger (quantity) and the value entry table (cost), tied to a costing method — FIFO, LIFO, Average, Standard, or Specific. Inventory is held at one or more locations, optionally subdivided into bins, and tagged with serial numbers, lot numbers, expiry dates, or item variants. Inventory valuation flows to the GL through inventory posting groups and is reconciled against the balance sheet at period close.

In practice, the costing method choice matters more than most implementation teams expect at first: FIFO assumes the oldest stock moves first and tracks cost accordingly, Standard uses a fixed cost per item that variances get measured against, and Average smooths cost across all units on hand. Switching methods after go-live is disruptive because it changes how every existing balance is valued, so the choice is usually made once, deliberately, based on how the business actually manages stock rather than which method sounds most sophisticated.

Where confusion shows up: the item ledger (quantity) and the value entry table (cost) are two separate records of the same underlying transaction, and they can disagree if a cost adjustment runs without a corresponding quantity movement — a common source of "inventory doesn't reconcile" support tickets. Serial and lot tracking add a further layer: a company that needs to trace a specific batch to specific customers (for a recall, say) needs lot tracking configured on the item before the batch is received, not retrofitted after the fact, since historical transactions can't be tagged retroactively.