19-11-2012, 12:01 PM
Valuation of Inventory
Valuation of Inventory.ppt (Size: 116 KB / Downloads: 75)
Objectives of Inventory Valuation
Determination of Income (Gross Profit)
Determination of Financial Position (Balance Sheet)
Determination of Liquidity (Ratio Analysis)
Legal Obligation (Cos. Act, AS)
First In First Out Method (FIFO)
ADVANTAGES
Values the stock closer to the current market price - most recent purchases
Based on cost - no unrealised profit
Realistic - normal procedure of utilisation/selling those materials/goods which have been longest in stock.
DISADVANTAGES
Involves complicated calculations and hence increases the possibility of clerical errors.
Comparison between different jobs using the same type of material becomes difficult.