BillmanWhat is stock valuation?
Stock valuation puts a rupee value on the goods you have left at the end of a period. That closing stock goes on your balance sheet, and it decides your cost of goods sold and so your profit.
When you bought the same item at different prices, you need a rule for which cost the remaining stock carries. FIFO and weighted average are the two rules used in India.
How to use this calculator
- Enter the opening stock quantity and its cost per unit.
- Add each purchase (quantity and cost per unit) and each sale (quantity), in date order.
- Switch between FIFO and Weighted average. The other method’s value is shown underneath for comparison.
- Use cost prices without GST. Sales are taken out at cost, not at the selling price.
Which method should a shop use?
Indian accounting standards (AS 2 and Ind AS 2) allow FIFO or weighted average cost. LIFO is not allowed. Pick one method and use it every year, so your profit can be compared from year to year.
When prices are rising, FIFO gives a higher closing stock value and a higher profit; weighted average smooths prices out. Stock is valued at cost or at the price it can be sold for, whichever is lower.