materials, work-in-progress, finished goods, products bought for resale, and
service items. Often the value of such stock is high, representing a
considerable sum of money and so it is important that it is valued
consistently, and proper controls are kept over the physical stock.
In this chapter we look at:
valuation of stock, including the application of IAS 2, Inventories
FIFO (first in, first out) and AVCO (average cost) methods of stock
valuation
use of a stores ledger record – or stock card – to calculate the value of
closing stock
effect on profits, in the short-term, of different methods of stock
valuation
advantages and disadvantages of FIFO and AVCO
importance of the stock-take and stock reconciliation
Stocks
Companies often have stocks – or inventories – in various forms:
• raw materials, for use in a manufacturing business
• work-in-progress (partly manufactured goods) and finished goods (ready for sale) of a
manufacturing business
• products bought for resale by a retailer
• service items, such as stationery, bought for use within a business
Stock is often kept in the stores or storeroom of a company and the person who looks after it is the
storekeeper.
