Stock Valuation

Illustration: 1
Sumit Ltd. has purchased and issued the materials in the following order:

Month Date Particulars Units Cost Per Unit Rs.

August, 2003 01 Purchases 300 3
04 Purchases 600 4
06 Issues 500 -
10 Purchases 700 4
15 Issues 800 -
20 Purchases 300 5
23 Issues 100 -
Ascertain the quantity of closing stock as on 31 st August, 2003 and state what will be the value under
the following methods.
(1 ) First in first out method. (2 ) Weighted Average method.

Solution:
(A) FIFO
Date Receipts Issues Balance
Units Price Amount Units Price Amount Units Price Value
1-8-2003 Opng. - - - - - Nil Nil Nil
1-8-2003 300 3.00 900 - - - 300 3.00 900
4-8-2003 600 4.00 2,400 - - - 300 3.00 900
600 4.00 2,400
6-8-2003 - - - 300 3.00 900 400 4.00 1,600
200 4.00 800
10-8-2003 700 4.00 2,800 - - - 400 4.00 1,600
700 4.00 2,800
15-8-2003 - - - 400 4.00 1,600 300 4.00 1,200
400 4.00 1,600
20-8-2003 300 5.00 1,500 - - - 300 4.00 1,200
300 5.00 1,500
23-8-2003 - - - 100 4.00 400 200 4.00 800
300 5.00 1,500

Therefore, the value of stock as on 31-8-2003 : Rs. 2,300

 Stock Valuation

(B) Weighted Average (Perpetual Inventory System)

STOCK LEDGER
Date Receipts Issues Balance
Units Price Amount Units Wt. Avg. Amount Units Value
rate
01-8-2003 Opng. - - - - - Nil Nil
01-8-2003 300 3.00 900 - - - 300 900
04-8-2003 600 4.00 2,400 - - - 900 3,300
06-8-2003 - - - 500 3.67 1,835 400 1,465
10-8-2003 700 4.00 2,800 - - - 1,100 4,265
15-8-2003 - - - 800 3.88 3,104 300 1,161
20-8-2003 300 5.00 1,500 - - - 600 2,661
23-8-2003 - - - 100 4.44 444 500 2,217

Working Notes:
(1) Issue on August 6 is valued at Rs. 3.67 which is the weighted average rate, arrived at as follows:
900 + 2,400 = 3,300 = 3.666 r/o 3.67
300 + 600 900

(2) Issue on August 15 is valued at Rs. 3.88 per kg. which is the weighted average rate arrived at as
follows:
1,465 + 2,800 = 4,265 = 3.877 r/o 3.88
400 + 700 1,100

(3) Issue on August 23 is valued at Rs. 4.44 per kg. which is the weighted average rate arrived at as
follows:
1,161 + 1,500 = 2,661 = 4.435 r/o 4.44
300 + 300 600
Therefore, the value of stock as on 31-8-2003 : 500 units @ Rs. 4.44 = Rs. 2,217

Illustration: 2
Calculate by FIFO method and weighted Average Cost of inventory valuation, the cost of goods sold and
value of closing inventory from the following data:

Date Transactions Units Price per unit

01-01-2003 Opening stock 1,500 20
05-02-2003 Purchases 750 25
10-03-2003 Purchases 600 22
15-03-2003 Sales 1,800 30
12-04-2003 Sales 750 31
16-05-2003 Purchases 600 25
25-06-2003 Sales 750 32
 Stock Valuation

Solution:
(1 ) First In First Out (FIFO)
Stores Ledger Account

Date Purchases Issues Balance

Units Rate Rs. Units Rate Rs. Units Rate Rs.
Rs. Rs. Rs.
01-01-2003 - - - - - - 1,500 20 30,000
05-02-2003 750 25 18,750 - - - 1,500 20 30,000
750 25 18,750
10-03-2003 600 22 13,200 - - - 1,500 20 30,000
750 25 18,750
600 22 13,200
15-03-2003 - - - 1,500 20 30,000 450 25 11,250
300 25 7,500 600 22 13,200
12-04-2003 - - - 450 25 11,250 300 22 6,600
300 22 6,600
16-05-2003 600 25 15,000 - - - 300 22 6,600
600 25 15,000
25-06-2003 - - - 300 22 6,600 150 25 3,750
450 25 11,250
Total 46,950 73,200 3,750

Cost of goods sold = Opening stock + Purchases - Closing Stock = 30,000 + 46,950 3,750 = Rs. 73,200
Value of closing inventory Rs. 3,750

(2) Weighted Average Cost

Date Purchases Issues Balance

Units Rate Rs. Rs. Units W.A.R. Rs. Units Rs.
Rs.
01-01-2003 - - - - - - 1,500 30,000
05-02-2003 750 25 18,750 - - - 2,250 48,750
10-03-2003 600 22 13,200 - - - 2,850 61,950
15-03-2003 - - - 1,800 21.74 39,126 1,050 22,824
12-04-2003 - - - 750 21.74 16,303 300 6,521
16-05-2003 600 25 15,000 - - - 900 21,521
25-06-2003 - - - 750 23.91 17,934 150 3,587
Total 46,950 73,363 3,587

Cost of goods sold Rs. 73,363.

Value of closing inventory = Opening stock + Purchases cost of Goods Sold
= Rs. 30,000 + Rs. 46,950 Rs. 73,363 = Rs. 3,587.
 Stock Valuation

Illustration: 3
The following are the details of a spare part of Sriram Mills:

01-01-2004 Opening Stock Nil

01-01-2004 Purchases 100 units @ Rs. 30 per unit
15-01-2004 Issued for Consumption 50 units
01-02-2004 Purchases 200 units @ Rs. 40 per unit
15-02-2004 Issued for Consumption 100 units
20-02-2004 Issued for Consumption 100 units
01-03-2004 Purchases 150 units @ Rs. 50 per unit
15-03-2004 Issued for Consumption 100 units
Find out the value of stock as on 31-03-2004 if the company follows : (a) First In First Out basis:
(b) Weighted Average basis.

Solution :
(A) FIFO Method :

STOCK LEDGER
Date Receipts Issues Balance
Units Price Amount Units Price Amount Units Price Value
01-1-2004 Opng. - - - - - Nil Nil Nil
01-1-2004 100 30.00 3,000 - - - 100 30.00 3,000
15-1-2004 - - - 50 30.00 1,500 50 30.00 1,500
01-2-2004 200 40.00 8,000 - - - 50 30.00 1,500
200 40.00 8,000
15-2-2004 - - - 50 30.00 1,500 150 40.00 6,000
50 40.00 2,000
20-2-2004 - - - 100 40.00 4,000 50 40.00 2,000
01-3-2004 150 50.00 7,500 - - - 50 40.00 2,000
150 50.00 7,500
15-3-2004 - - - 50 40.00 2,000 100 50.00 5,000
50 50.00 2,500

Therefore, the value of stock of as on 31-3-2004 : 100 units @ Rs. 50.00 = Rs. 5,000.

(B) Weighted Average (Perpetual System of Inventory):

STOCK LEDGER
Date Receipts Issues Balance
Units Price Amount Units Wt.Avg. Amount Units Value
Rate
01-1-2004 Opng. - - - - - Nil Nil
01-1-2004 100 30.00 3,000 - - - 100 3,000
15-1-2004 - - - 50 30.00 1,500 50 1,500
01-2-2004 200 40.00 8,000 - - - 250 9,500
 Stock Valuation

15-2-2004 - - - 100 38.00 3,800 150 5,700

20-2-2004 - - - 100 38.00 3,800 50 1,900
01-3-2004 150 50.00 7,500 - - - 200 9,400
15-3-2004 - - - 100 47.00 4,700 100 4,700

Therefore, the value of stock of as on 31-3-2004 : 100 units @ Rs. 47.00 = Rs. 4,700.

Working Notes:
(1) Weighted Average Rate on 15-2-2004 = 1,500 + 8,000 = Rs. 38
250

(2) Weighted Average Rate on 15-3-2004 = 1,900 + 7,500 = Rs. 47

200