Inventory valuation

III. Nature of inventory...………………………………………………………………………………..4
1. Classes of inventory………………………………………………………….…………….4
IV. Inventory valuation methods………..……………………………………………….………………5
1. FIFO method…...………………………………………………………….………..……..5
2. Weighted average method……………………………………………………….…..…….6
3. LIFO method…………………………………………………………………….…..…….6
3. 1. Evaluation of LIFO as a cost allocation method………………………….…………..7
3.2. Major advantages of LIFO…………………………………………………….……...7
3.3 Major disadvantages of LIFO………………………………………….……………...7
4. Specific identification method…………………………………………….……………….8
5. FIFO……………………………………………………………………….………………..9
6. Weighted average………………………………………………………...………………..10
7. LIFO..............................................................................................................................…...11
8. Specific identification…………………………………………………...…………………12
V. Comparing inventory cost methods…….………………………………………………………...12
VI. Example 1…...…………………………………………………………………………………...13
VII. Example 2............................................................................................................................…...13
VIII. Characteristics of each method……………………………………………......………………15
IX. Other cost methods……………………………………………………………...……...……….16
1. Cost of latest purchases…………………………………………………………………16
2. Standard costs……………………………………………………………….………16
3. Direct costing…………………………………………………….………………….16
4. The retail method……………………………………………………………………17
X. Conclusion……….……………………………………………………………...……………….19
XI. Bibliography…………………..………………………………………………..……………….20
Introduction
This paper work focuses the theme of inventory valuation methods.
The first basic steps had been taken in this work are the characterization of inventory, its classes.
Then I introduced four main inventory valuation methods: LIFO, FIFO, weighted average and specific identification methods. This way the reader will have independent ideas of what is what, this is a very important and as the work evolves the reader will have the perception of the difference among them. . I explained them using theory, some examples, and illustrations.
There is also a short presentation and explanation of each method using examples and illustrations. This way is possible to formulate an opinion on four main methods.
After this the advantages and disadvantages of four inventory valuation methods will be explored in an easy comprehensive way, this way will be easy to compare them.
Moreover, I presented others, less used, cost methods.
In conclusion there is discussed the importance of consistency of inventory valuation methods and importance of inflation.
Nature of inventory
The term inventory designates goods held for sale in the normal course of business and, in the case of manufacturer, goods in production or to be placed in production. The nature of goods classified as inventory varies widely with the nature of business activities, and in some cases includes assets not normally thought of as inventory. For example, land and buildings held for resale by a real estate firm, partially...

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