Inventory Valuation

1. Presentation by
Dwaipayan Regmi
14781E00M6
Andhra Pradesh, India
29 Jan 2015

2.  Inventory is defined as assets that
◦ are intended for sale,
◦ are in process of being produced for sale
◦ or are to be used in producing goods.
 Mathematically
◦ > Beginning Inventory + Net Purchases - Cost of Good Sold
(COGS) = Ending Inventory

4. Does not show the amount of merchandise available
for sale and the amount sold.
A listing of inventory on hand, called a physical
inventory, is prepared at the end of the accounting
period
Quantity and value of the stock is determined at the
end of accounting period.

5. Closing Stock= Opening Stock+ Purchases-Issues
i.e. Closing Stock= (400+600+500+400+300-300-500-400-500-
200) Units
=300 Units
Thus,
Value of Closing Stock=Closing Stock (in units) X Beginning
Inventory Rate
=300 units X RS 7.5
= Rs.2250

6. Each purchase and sale of merchandise is recorded in the
inventory account and related subsidiary ledger.
Value and quantity of Inventory is recorded after
transaction.
It makes availability of inventory’s data at any time.

7.  Goods placed last in an inventory are sold first. The
goods placed first in the inventory remain in the
inventory at the end of the year

8. LIFO Method
Date Purchases Issues Balances
Quantity Rate Total Quantity Rate Total Quantity Rate Total
1-Mar 400 7.5 3000 - - - 400 7.5 3000
3-Mar - - - 300 7.5 2250 100 7.5 750
5-Mar 600 8 4800 - - - 100 7.5 750
600 8 4800
10-Mar - - - 500 8 4000 100 7.5 750
100 8 800
15-Mar 500 9 4500 - - - 100 7.5 750
100 8 800
500 9 4500
17-Mar - - - 400 9 3600 100 7.5 750
100 8 800
100 9 900
25-Mar 400 8.5 3400 - - - 100 7.5 750
100 8 800
100 9 900
400 8.5 3400
26-Mar - - - 400 8.5 3400 100 7.5 750
100 9 900 100 8 800
30-Mar 300 9.5 1900 - - - 100 7.5 750
100 8 800
300 9.5 2850
31-Mar - - - 200 9.5 1900 100 7.5 750
100 8 800
100 9.5 950
Value of Stock = ( 100*7.5 + 100*8 + 100*9.5 ) = Rs. 2500

9.  First In First Out (FIFO)
 Base Stock Method
 Market Price Method
 Standard Price Method