O Level Notes : Accounts - Valuation of stock
Stock taking is checking whether the stock shown on paper rally exists or not and a Store keeper is one who records things coming in or going out of the stock of a business .
Valuation of stock
Stock taking: checking whether the stock shown on paper rally exists or not.
Store keeper : one who records things coming in or going out of the stock of a business .
METHODS FOR VALUATION OF STOCK
FIFO
Things that come to us first must be issued first. This method is used for perishable items or for things which expire e.g medicines.
LIFO
Last in first out
This method is used for where in which technological advancements are expected. E.f you have p1, p3 stock of computers you would want to get p3 out first before its market price falls too by the introduction of a newer version of computer.
AVCO
Average cost method
Under this method you recalculate the average cost after every receipt of a batch of new stock and then use it as the cost of the next batch sold.This method is used for durable items in which no technological advancements are expected for example furniture,etc
NOTE : for all these methods, closing stock is the same except for FIFO. Closing stock for FIFO is usually higher.