Valuation is not the same as stock quantity
A warehouse can have 100 pieces available even though those pieces were purchased at several prices. The stock ledger explains quantities and movements; valuation explains the cost assigned to stock and issues. Suppose 10 units arrive at ₹100 each and another 10 arrive at ₹120. The method you configure affects the cost of the next units issued, even though the physical quantity does not change.
How FIFO and LIFO work
FIFO, or first in first out, assigns the oldest available cost layer first. In the example, issuing ten units under FIFO uses the ₹100 layer. LIFO, or last in first out, starts with the newest layer and would assign ₹120 per unit to that issue. These methods describe cost assignment; your warehouse may still physically dispatch a different batch. LIFO may not be permitted for external financial reporting under applicable accounting standards.
How weighted average works
Weighted average pools eligible inventory cost and quantity to calculate a unit average. With ten units at ₹100 and ten at ₹120, the simple weighted average becomes ₹110 per unit before other eligible cost adjustments. Subsequent purchases and issues can change that average depending on system policy. Freight, purchase discounts, tax treatment and returns must be configured consistently or the number can become misleading.
Pick a defensible policy
Ask your accountant which method is appropriate for the business and financial reporting framework. Apply the approved approach consistently and test purchases, returns, transfers and negative-stock situations. Reconcile valuation reports with inventory and accounting records at agreed intervals. XlinkONE provides valuation configurations and stock reporting; these tools cannot replace a documented accounting policy or reliable transaction posting.