THE VALUATION OF

STOCK
INSTRUTOR
Ms Juweriya Zafar
 Different valuations of stock
 Stock is the name given
to the goods
for resale, work in
progress and raw
materials that are heldAssume that a business has just completed its first
at a point in time. financial year and is about to value stock at cost
price.

Bought Sold
2005 $ 2005 $
Jan 10 at $30each 300 May 8 for $50each 400
April 10 at $34each 340 Nov 24 for $60each 1,440
Oct 20at $40each 800
Total 40 1440 Total 32 1,840
 The total figure of purchases is $ 1,440
and sales revenue during the year was
$ 1,840. The trading account for the first
year of trading can now be completed using
the closing stock in calculations.
 There are three most commonly used methods of
valuing stock.
1. FIFO : First in, first out method
2. LIFO : Last in, first out method
3. AVCO : Average cost method
 FIFO: First in, First out method
Received Issued Stock after each transaction
2005
Jan 10 at $30 each 10 at $30each $300
April 10 at $34 each 10 at $30 each 300
10 at $34 each 340 $640
May 8 at $ 30 each 2 at $30 each 60
10 at $34 each 340 $ 400
Oct 20 at $40 each 2 at $30 each 60
10 at $34 each 340
20 at $40 each 800 $1200

Nov 2 at $30 each 8 at $ 40 each

10 at $34 each $ 320
12 at $40 each
 LIFO: Last in, First out method
Received Issued Stock after each transaction
2005
Jan 10 at $30 each 10 at $30each $300
April 10 at $34 each 10 at $30 each 300
10 at $34 each 340 $640
May 8 at $ 34 each 10 at $30 each 300
2 at $34 each 68 $ 368
Oct 20 at $40 each 10 at $30 each 300
2 at $34 each 68
20 at $40 each 800 $1168

Nov 20 at $40 each 8 at $ 30 each

2 at $34 each $ 240
2 at $30 each
 AVCO: Average cost method

Received Issued Avg. cost per No. of units in Total value of

unit of stock stock Stock
held
Jan 10 at $30 30 10 300
April 10 at $ 34 32 20 640
May 8 at $32 32 12 384
Oct 20 at $40 37 32 1184
Nov 24 at $37 37 8 296

In April, this is calculated as follows : Stock 10 X $30 = 300 + stock 10 X $34 = 340
TOTAL $640 . Then divide by 20 units will give you $32
In October, this is calculated as follows : stock 12 X 32 = $384 + stock 20 X 40 = 800
So 800 + 384 = 1184. There are 32 units in stock, so the average is $37