Kardex in accounting: what it is for
Kardex in accounting: what it is for
When a business buys, stores, and sells merchandise, information about its inventory flows along two paths: the warehouse, which looks after the physical units, and the accounting department, which must express those units as values in the books. The kardex is precisely the bridge between the two. It is not a mandatory accounting ledger in itself, but an auxiliary control record: it logs, product by product, the inflows and outflows of merchandise with their quantities and, when the system allows it, their cost. On that basis, accounting determines how much the inventory is worth at any moment and how much the items sold during a period cost.
Here we focus on the accounting view of the kardex: the place it occupies in a business's accounting, how it feeds the cost of sales and the income statement, its relationship with the inventory account in the chart of accounts, and its role with respect to standards such as IFRS. You will also see what the kardex does and what the accountant does, two different jobs that are often confused.
The kardex: an auxiliary record for the inventory account
In accounting, the inventory (or merchandise) account accumulates in a single value everything the company has available for sale, but that number does not explain which products make it up, how many units there are of each one, or at what cost they were purchased. That is what auxiliary records are for: detailed registers that support and break down the balance of an account. The kardex performs that function: each card represents one item, and all the cards together, valued at cost, should match the accounting balance. That is why it supports the figures: when the accountant reviews the balance, the detail per product — inflows, outflows, and balances — shows where the number comes from. A well-kept kardex is not a warehouse luxury: it is part of the company's financial information.
What the kardex records and how accounting uses that information
To understand the link between the kardex and accounting, look side by side at what the card records and how whoever keeps the books uses it:
| Kardex information | Accounting use |
|---|---|
| Merchandise inflows | Support the debits to the inventory account when a purchase is recorded. |
| Outflows from sales | Make it possible to calculate the cost of goods sold and the credit to the inventory account. |
| Unit cost and valuation method | Set the value at which inventory and cost of sales are recorded (weighted average, FIFO, or other). |
| Returns and adjustments | Justify correcting entries in the inventory account and in cost. |
| Final balance per product | Used to verify the account balance and to reconcile with the physical count. |
| Supporting document | Provides traceability: every accounting movement can be explained by its source. |
How the kardex feeds the cost of sales
Cost of sales is the value of the merchandise sold during a period and one of the most important figures in the income statement. To calculate it you need to know how many units were sold and at what cost each one left; that information comes, movement by movement, from the kardex. When a sale is recorded, the outflow on the card shows how many units left and at what cost, and that value is carried over as the cost of that sale.
The valuation method — weighted average, first in first out (FIFO), or others — changes how the cost of each outflow is calculated, but in every case the kardex documents that calculation. Without a reliable record of outflows, the cost of sales is a guess in the air; with an orderly kardex, that number has support and can be explained.
The kardex, ending inventory, and the income statement
The income statement shows how much the company sold, what that merchandise cost, and what gross profit it earned: the difference between sales revenue and the cost of sales. Because the cost depends on inventory, the kardex has a direct influence on profit: an error in the recorded outflows can inflate or reduce the cost and, with it, the reported profit.
The kardex also protects the value of ending inventory, which appears on the balance sheet as part of the assets. To calculate it, accounting starts from the beginning inventory, adds purchases, and subtracts the merchandise sold: an inventory equation that only works if inflows and outflows are properly recorded. In that scheme, the kardex provides the data and the accountant turns it into figures for the financial statements.
The inventory account in the chart of accounts
To keep double-entry accounting, every company uses a chart or catalogue of accounts, in which inventories occupy their own group within the assets. In Colombia's Plan Único de Cuentas (PUC), for example, merchandise is grouped under the inventory accounts in the 14 range; in other countries the code changes, but the logic is the same: a main account that accumulates the value of the merchandise and auxiliary records that detail it. We mention this as a general example, because codes and rules vary from country to country.
What matters is not memorizing the code, but understanding the relationship: the account is the summary, and the kardex is its detail. When the auxiliary records are up to date, balancing the account is quick; when they do not exist, the balance has no explanation, and any difference with the physical count becomes a headache.
The kardex as the backbone of perpetual inventory
There are two basic ways of keeping inventory in accounting: the periodic system, which determines stock only through a count or at the end of the period, and the perpetual system, also called continuous inventory, which keeps the merchandise balance updated with every purchase and sale. The kardex is the heart of the perpetual system: it is the record that lets you know, at any time and without physically counting, how many units and how much value remain of each product.
When a company says it operates a perpetual inventory, in practice it means it keeps a kardex — on paper or in software — up to date and reconciled with the books, recording each outflow with its cost at the moment of the sale. The result is twofold: the books reflect the reality of the warehouse, and the warehouse works with figures the books can back up.
The kardex and accounting standards: the link with IFRS
International Financial Reporting Standards (IFRS) do not say what a kardex card must look like, nor do they require that specific format: they are standards about how to measure and disclose information, not operational manuals for the warehouse. What they do require, in general terms, is that the company have stock control that lets it value inventory reliably, apply its chosen valuation method consistently, and report figures that can be verified.
Seen that way, the kardex is the company's operational ally in meeting those requirements: without detailed records of inflows, outflows, and costs, it is difficult to demonstrate that the inventory value is reasonable and that the cost of sales was calculated on real information.
The role of the kardex versus the role of the accountant
It is worth being clear that the kardex does not replace the accountant, and accounting does not replace the kardex: they are tools of a different nature. The kardex records the physical, valued movement of the merchandise and is fed by documents such as purchase invoices, delivery notes, and issue slips; the accountant, for his or her part, takes that data, validates it, turns it into accounting entries, and decides how it is presented in the financial statements.
- The kardex answers: how many units of each product came in, went out, and remain, and at what cost?
- The accountant answers: how is that information recorded in the books and how is it presented in the financial reports?
In practice they work in a chain: a good kardex makes the accountant's work more reliable, and orderly accounting requires the kardex to stay up to date. Without an accountant, the kardex remains a warehouse control that is never translated into financial figures; without a kardex, the accounting of inventory has no support.
Conclusion
The kardex in accounting serves, in one sentence, to turn the movement of merchandise into reliable financial information: it supports the inventory account, feeds the cost of sales, protects the company's profit, and sustains the perpetual inventory system. It is not an accounting requirement in itself, but it is the practical tool that allows the numbers of the warehouse and the numbers of the books to say the same thing.
If you are looking for a simple way to keep that record up to date, with the inflows, outflows, and costs of every product always available to you and to your accountant, tools like Kardex Tauro let you control your inventory and leave the information ready for accounting.