Simply keeping an account of unsold goods can be termed inventory valuation. This can be explained with the help of an example. If you own a bag business, and there is about 65 pieces of bag left by the year end, the financial value is to be calculated and recorded in the balance sheet. The left-over stock of bags is an asset of the company and their financial value can help in estimating the inventory turnover ratio with helping in planning the future purchase. There are different methods to find the valuation. They are FIFO (First In First Out), LIFO (Last In First Out), and WAC (Weighted Average Cost). While doing a business, you may need to apply for a loan. In this scenario, if the stock is high in number in the balance sheet, that means you are giving an assurance to the lender. Also, this method can help in saving tax. The important thing is not to change the valuation technique too often as it affects bookkeeping and also can raise suspicions. Let's view a slide show of this topic.

Aparika Sharma

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