Thanks Farouk. I have already done so after reading a blog entry. I followed the stock inventory model : beginning inventory + purchases = available for sale. Av. for sale = cost of goods sold + end inventory. I want to ask one question though: Why is the Purchase Account with Account type=Expense in your prescription, because I think it should be of type=Asset, just as Purchased Account is type=Asset. Your response would be helpful.

Hi David, in my Chart of Accounts, "Purchase Account" represents the money I spent for buying the products, so it's an expense account. The "Purchased Stock" represents the stock bought by the company, so that's the Asset account you are referring to in my case. So when I create a Purchase Invoice, my "Purchase Account" will get debited and "Supplier Account" will get credited. Then when I create an Incoming Shipment document for receiving those purchased product, "Purchase Account" will get credited and "Purchased Stock" account will get debited.

Now when you sell this product, this is the way accounting entries gets created. 1) When Sales Invoice is created, "Sales Account" gets credited with sales price and "Customer Account" gets debited with sales price 2) When you create a Delivery Order for the same product and deliver it from the warehouse, "Purchased Stock" Account gets credited with the cost price and "Sales Account" gets debited with the Cost Price.

Chart of accounts comment: I follow your logic, Farook, but the money spent for buying the product is reflected in either Accounts Payable for the customer (if on credit) or cash account (if on cash basis). You should rename Purchase Account, Stock Purchases Account. I am a student of accounting. On buying goods, you debit the Stock Purchases Account and credit the cash or Accounts Payable account. Eventually, when you are to deliver the goods, or when it is doing inventory management, the system does a reconciliation between Stock Purchases Account and Purchased Account (to be continued)

in reconciliation, it then credits Stock Purchases Account and debits Stock Purchased Account. so check account reconciliation for all your stock accounts. I uncheck for all accounts by default. So, you see, both are stock accounts and asset accounts, only that openerp wants a seamless inventory management system so it doesn't confuse purchases with stock available for sale which is that base for valuation. thanks. also, it was programmed that beginning and ending stock are virtual containers which are reflected in Stock Purchased Account.

BTW, when you deliver goods, Stock Purchased account gets credited while cost of goods sold is debited. Cost of goods sold is an expense account.

@Farook can you please tell me that what is internal type and Account Type for Price Difference Account ?(I installed account_anglo_saxon module)