# Inventory Valuation

## Markup Percentage Formula and Margin Percentage Formula

Difference between Markup Percentage Price and Margin Percentage Price: Many business often use concepts of margin and markup as guides for setting the prices of…

## Physical Count Method of Closing Inventory

Physical Count Procedure of Closing Inventory – Definition and Explanation: The inventory value shown in the balance sheet is usually calculated through a physical inventory…

## Periodic and Perpetual Systems of Inventory Accounting

There are two types of systems of inventory accounting, which are briefly discussed below: (1) Periodic Inventory System – Definition and Explanation: When the periodic…

## Goods on Sale or Return Basis

Goods Sent to Customers on Sale or Return (Approval) Basis: When goods are sent on a “sale or return” or on “approval” basis, these goods…

## Effects of Errors in Valuing Inventory

The errors in valuing inventories affect the profit and assets in the following way:

## Separate Valuation of Inventory Items

Accounting standards require that the cost and net realizable value (NRV) of each inventory item should be calculated individually and the lower figure taken in…

## Role of Accounting Concepts in Inventory Valuation

Historical “Cost Concept” states that assets including inventory should be recorded at their original cost until they are sold. In other words, no profit should…

## Physical Flow of Goods VS Inventory Valuation Methods

The valuation methods are bookkeeping methods and must not be confused with the physical flow of inventory. As most goods deteriorate with age, the physical…

## Calculation of Gross Profit using Calculated Inventories of FIFO and AVCO

Calculation of Gross Profit (Perpetual): To calculate gross profit (perpetual) and gross profit (periodic), we take calculated inventories of FIFO from First in First out…

## Weighted Average Cost (AVCO) Method

Definition and Explanation: The weighted average cost (AVCO) method or standard cost method involves computing the weighted average cost of the inventory held after each…

## First in First out Method (FIFO)

Definition and Explanation: The FIFO method uses the price of first batch received for costing all units of sales until all units from this batch…

## Inventory Valuation Methods

Records of inventories are not normally included in the double entry system. Most organizations keep a separate record of inventories, outside the ledger, by maintaining…