Inventory Valuation Methods (Grade 12 NSC Matric Accounting): Flashcards
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Inventory valuation
Inventory valuation
Determining monetary value of business's stock on hand
Inventory valuation consistency principle
Inventory valuation consistency principle
Must stick to chosen method across accounting periods
Specific identification method
Specific identification method
Each item tracked with its actual purchase price
When to use specific identification
When to use specific identification
Large, expensive, unique items (vehicles, machinery, jewellery)
FIFO meaning
FIFO meaning
First In, First Out - oldest stock sold first
FIFO closing stock valuation
FIFO closing stock valuation
Valued using most recent purchase prices
When to use FIFO method
When to use FIFO method
Perishable goods (food, medicines, electronics)
Weighted average method
Weighted average method
Calculates average cost for all inventory items
Weighted average formula
Weighted average formula
Total cost of stock / Total units purchased
Weighted average key characteristic
Weighted average key characteristic
Smooths out price fluctuations over time