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Accounting For Business and Management: Valuation (Stock/Inventory)
Accounting For Business and Management: Valuation (Stock/Inventory)
Accounting For Business and Management: Valuation (Stock/Inventory)
AND MANAGEMENT
WEEK 4
VALUATION (STOCK/INVENTORY)
LEARNING OBJECTIVES
LEARNING OUTCOMES
Income
and
Statement
of
Financial Position.
Valuation of Stocks/Inventory
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Method (a) ignores the fact that the dealer had a bad
trading year owing to his skill being found wanting in
20X7.
If this method was used, then the loss on the fake would
reveal itself in the following year's trading account.
Method (b), however, realises that the loss really
occurred at the date of purchase rather than at the date
of sale.
Following the concept of prudence accounting practice
chooses method (b). At one time the terminology was
`lower of cost or market value'. Changing it to `lower of
cost or net realisable value' gives a more precise
definition to the terms used.
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Category Method
Stock as at 31 December 20X7
The
same sorts of
Article
Different
Cost (RM)
Net
items are put together
categories
realisable
value (RM)
in categories. Thus,
100
80
1
A
articles 1, 2 and 3
150
A
120
2
400
A
300
3
televisions and shown
180
170
B
4
as category A. Articles
150
130
B
5
B
260
210
6
4, 5 and 6 are radios
540
C
410
7
and shown as category
410
8
C
360
310
9
C
420
B. Articles 7, 8 and 9
2, 300
2, 400
are videos and shown
Articles 1, 2 and 3 are televisions. Articles 4, 5 and
6 are radios. Articles 7, 8 and 9 are videos.
as
category
C.
Calculation shown
the next slide.
Last Updated:31 October 2014
in
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Category Method
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Article Method
By this method, the lower of cost or net realisable value
for each article is compared and the lowest figure taken.
From the previous table, this gives us the following
valuation:
Article
1
2
3
4
5
6
7
8
9
Articles
1
2
3
4
5
6
7
8
9
Valuation
RM
80
120
300
170
130
210
410
360
310
2, 090
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REFERENCES
McLaney, E. and Atril, P., (2006), Accounting and Finance for Non-Specialists, 5th
Edition, FT/Prentice Hall.
McLaney, E. and Atrill, P., (2002), Accounting: An Introduction, FT/Prentice Hall.
Davies, T. and Pain, B., (2002), Business Accounting and Finance, 2002, McGraw
Hill (ISBN 0-07-709825-0).
Arnold, J., Hope, T. and Southworth, A., and Kirkham, L., (1994), Financial
Accounting, 2nd Edition, Prentice Hall International.
Berry, A. and Jarvis, R. (1999), Accounting in Business Context, 3rd Ed, Thompson
Business Press.
Berry, A. (1999), Accounting: an Introduction, 2nd Edition, Thompson Business Press.
Glautier, M.W.E and Underdown, B., (2001), Accounting Theory and Practice, 7th
Edition, Prentice Hall.
Holmes, G. and Sugden, A., (1999), Interpreting Company Reports and Accounts, 7th
Edition, Financial Times/Prentice Hall.
Drury, C. (2001) Management Accounting for Business Decisions, International
Thomson Business Press.
Drury, C. (1998), Costing An Introduction, 4th Edition, International Thomson
Business Press.
Williamson, D., (1996), Cost and Management Accounting, Prentice Hall.
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