Stock Valuation
Stock Valuation <ul><li>What is the cost of the bed? </li></ul><ul><li>$1200 </li></ul><ul><li>$800 </li></ul><ul><li>$900...
Cost of stock <ul><li>Cost of stock – all costs incurred in order to bring stock into a condition and location ready for s...
Product Costs <ul><li>Product costs – a cost incurred in order to bring stock into a condition and location ready for sale...
Product Costs
Period Costs <ul><li>Period cost – a cost incurred in order to bring stock into a condition and location ready for sale th...
Period Costs
Lower of cost and NRV <ul><li>How do we value stock when it is probable that we will make a loss on the sale of that stock...
Cost of stock <ul><li>Cost of stock – all costs incurred in order to bring stock into a condition and location ready for s...
Net Realisable Value (NRV) <ul><li>The estimated selling price of stock less any direct costs incurred in selling that sto...
Rule <ul><li>Stock must be valued at the lower of cost and NRV. </li></ul><ul><li>This upholds the rule of conservatism. <...
Stock write down
Stock write down
Stock write down
Stock write down
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Stock Valuation

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A presentation for VCE Accounting Unit 4 on stock valuation. Covers product cost and period cost as well as lower of cost and net realisable value of stock.

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Stock Valuation

  1. 1. Stock Valuation
  2. 2. Stock Valuation <ul><li>What is the cost of the bed? </li></ul><ul><li>$1200 </li></ul><ul><li>$800 </li></ul><ul><li>$900 </li></ul><ul><li>$990 </li></ul>
  3. 3. Cost of stock <ul><li>Cost of stock – all costs incurred in order to bring stock into a condition and location ready for sale. </li></ul><ul><li>This may include: </li></ul><ul><ul><li>Suppliers price </li></ul></ul><ul><ul><li>Freight in </li></ul></ul><ul><ul><li>Modifications </li></ul></ul><ul><ul><li>Customs/import duties </li></ul></ul><ul><ul><li>Buying expenses </li></ul></ul>
  4. 4. Product Costs <ul><li>Product costs – a cost incurred in order to bring stock into a condition and location ready for sale, which can be allocated to individual units of stock on a logical basis. </li></ul>
  5. 5. Product Costs
  6. 6. Period Costs <ul><li>Period cost – a cost incurred in order to bring stock into a condition and location ready for sale that is not allocated to individual units of stock because there is no logical basis to do so. </li></ul>
  7. 7. Period Costs
  8. 8. Lower of cost and NRV <ul><li>How do we value stock when it is probable that we will make a loss on the sale of that stock? For example, the stock is damaged or obsolete and we may end up selling it for less that its original purchase price. </li></ul>
  9. 9. Cost of stock <ul><li>Cost of stock – all costs incurred in order to bring stock into a condition and location ready for sale. </li></ul><ul><li>This may include: </li></ul><ul><ul><li>Suppliers price </li></ul></ul><ul><ul><li>Freight in </li></ul></ul><ul><ul><li>Modifications </li></ul></ul><ul><ul><li>Customs/import duties </li></ul></ul><ul><ul><li>Buying expenses </li></ul></ul>
  10. 10. Net Realisable Value (NRV) <ul><li>The estimated selling price of stock less any direct costs incurred in selling that stock. </li></ul>
  11. 11. Rule <ul><li>Stock must be valued at the lower of cost and NRV. </li></ul><ul><li>This upholds the rule of conservatism. </li></ul><ul><li>The rule must be applied to individual lines of stock, not the total value of stock. </li></ul>
  12. 12. Stock write down
  13. 13. Stock write down
  14. 14. Stock write down
  15. 15. Stock write down

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