Inventory Valuation Methods

Sometimes companies can buy a number of goods at different prices during one financial period, and the purchase price for the same item may differ due to fluctuations in the prices of goods during the financial period. Integrated:

First, a medium cost method
This method is based on the Afaky accounting program on one price for the stock. This price changes when any new quantities are received in the stores, where the average cost that expresses the price of materials is extracted and this average is calculated by the following equation:
Average Cost = (Cost of Inventory Quantity (Balance) + Cost of Incoming Quantity) / (Balance Quantity + Incoming Quantity)
This is the most useful method compared to other methods used for inventory pricing, because it only needs continuous mathematical and accounting operations to arrive at the cost of goods.
Thus, the materials released for production are priced at the average price, and this average price does not change except in the case of purchasing new quantities of materials and entering them into the stores.

Second, first-in, first-out method
This method depends within Afaky accounting program on the exit of the goods or goods that entered the store at the beginning so that only the recently purchased goods remain in the store so that the merchant can determine the cost of goods at the end of the period

Third, the actual differentiation method
This method is based on distinguishing the units of the last remaining period inventory according to the date on which the purchase is made according to the purchase invoices, and then the cost of the ending inventory is determined by multiplying the inventory units by the unit price according to the date of purchase. This method can be followed in establishments that have a limited number of goods And expensive, such as jewelry, cars and machinery, but this method is difficult to apply in large establishments that deal with many types of goods, so accountants resort to other methods in measuring the cost of end-of-term inventory