Stock Valuation

Methods of stocks valuation are devices which aim to deal with some of the problems. W shall consider some of those commonly adopted.

(I)      FIRST-IN-FIRST OUT (FIFO) METHOD.

This method assumes as the name indicates that items of stock were sold during the year in the order in which they were originally bought. Goods that were bought first (FIRST-IN) were those that were sold first, or issued first for production (FIRST-OUT). It follows then that items of closing stock will be made up of those bought most recently.