Lesson 4, Topic 4
Stock Valuation – Definition and Methods
Stock valuation is concerned with the ascertainment of stock value at a given point in time. The stock value can be determined using different methods.
Some of the methods commonly used are:
- First in, First Out (FIFO) Using this method for stock valuation, goods are priced at the price of the oldest stock, until all the goods of that batch have been issued. Thereafter, the price of the next oldest stock is used and so on.
- Last in First out (LIFO) Using this method, goods are charged at the price of the most recent batch received, until all goods of that batch have been issued out and so on.
- Weighted Average Method: Using this method, the average price is re-calculated after each receipt of goods, taking into cognizance both qualities and value of the goods.
- Delivery Note or Gate Pass: This is a note normally issued by the supplier or seller of the goods, to the person that received the goods or customer, to enable him to pass through the gate with the goods collected or bought.