Bookkeeping Ways to Value Your Stock

Part of Bookkeeping Workbook For Dummies Cheat Sheet (UK Edition)

Bookkeepers use various methods for valuing stock. Your company must choose one method and follow that method all the time, in order to keep the tax man happy. Four ways in which you can do this are:

  • LIFO (Last In, First Out): Assumes last (most recent) item put on the shelf is the first product sold.

  • FIFO (First In, First Out): Assumes first (oldest) item put on the shelf is the first one sold.

  • Averaging: You don’t need to worry about what item came in first or last. Average the cost of stock when calculating stock value.

  • Specific identification: Track how much you paid for each individual item to determine stock value.