Inventory is goods and materials held by a business for resale. It is given a value for insurance purposes and to determine profit. There are different methods to value inventory, such as FIFO (first in, first out) which matches the earliest acquired inventory to cost of goods sold, and LIFO (last in, first out) which does the opposite. An example is provided to illustrate calculating inventory value under both FIFO and LIFO accounting methods. Both methods have pros and cons, with LIFO reducing reported profits during inflation but being more complicated, while FIFO is simpler but may inflate profits during inflation.

2. WHAT IS INVENTORY TO A COMPANY AND
WHY GIVE IT A VALUE
 Inventory is goods and material that a business
holds for the purpose of resale.
 Inventory is a given value for two main purpose
1.insurance and
2.profit

3. FIFO
FIRST IN FIRST OUT

4. FIFO : This inventory method matches
sales with inventory by matching revenue
from the first sale with the costs associated
with the first product that was made first in
first out.

5. EXAMPLE: FIFO&LIFO
 1.OPENING BALANCE-
100UNITS@Rs.5 EACH
 5.RECEIVED -500UNITS@Rs.6 EACH
 20.ISSUED-300UNITS
 7.RECEIVED -600UNITS@Rs.5 EACH
 25.RETURNEDTO SUPPLIER -
50UNITS PURCHASED ON 7th
FEBRUARY
JANUARY
FEBRUARY

6.  JAN 1 opening balance in this sum
100units,each units have Rs.5.
 In JAN 5 we received 500 units, each
units have Rs.6 and enter into the
Recepits coloumn as GRN.
 In JAN 20 we issued 300 units from
first stock @Rs.5 and remaining units
taken from GRN.
 In FEB 7 we received 600 units each
units have Rs.5 and enter into recepits
coloumn as GRN.
 In FEB 25 we returns 50 units from
FEB 7 @ each Rs.5.
 Finally we have 850 units @ Rs.11 so
we get Rs.9350.
 The opening balance in this sum
100units,each units have Rs.5.
 In JAN 5 we received 500 units, each
units have Rs.6 and enter into the
Recepits coloumn as GRN.
 In JAN 20 we issued 300 units from
last stock @Rs.6.
 In FEB 7 we received 600 units each
unit have Rs.5 .
 In FEB 25 we returns 50 units from
FEB 7 @ each Rs.5.
 Finally we have 850 unita@ Rs.11 so
we get Rs.9350.

7. LIFO

8.  LIFO is a method of accounting for valuing
inventory .This method is based on the
assumption that the last item placed in the
inventory will be sold out first, i.e, reverse
chronological order will be followed in
issuing inventory from the stores.

9. LIFO
 It represents the oldest stock.
 LIFO shown by the cost of
goods sold.
 Income tax shows minimum
amount, when there is inflation
in the economy.
 In case of deflation, larger
amount of income tax is
shown.
FIFO
 It represents the latest
stock.
 FIFO shown by the cost of
unsold stock.
 In inflationary condition,
income tax shows a higher
amount.
 Reduced income tax will be
shown in deflationary
condition.

10. CONCLUSION
 Both the methods LIFO and FIFO has
its pros and cons. LIFO does not
inflate profits when the prices of
product are rising, but there are
complications in this method. FIFO is
very simple to understand as well as
to operate.

11. PRESENTED BY:
DIVYA PRABHA.U
LAVANYA.A