Valuation of Closing Stock by Zebra Stores on GAAP

Introduction:
Closing stock is the inventory of unsold goods at the end of an accounting period. It is an important aspect of a business as it affects the calculation of cost of goods sold and thereby the net profit of the business. Zebra Stores follows generally accepted accounting principles (GAAP) for valuation of its closing stock.

Stock Taking:
Zebra Stores conducts a physical stock taking at the end of each financial year, i.e., 31st March. This involves physically counting the inventory of goods held by the business at the end of the year. The stock taking process is carried out by trained personnel who carefully count and record the quantity of each item of stock.

Valuation:
Once the physical stock taking is completed, the next step is to value the closing stock. Zebra Stores uses the following method for valuation of its closing stock:

- First In First Out (FIFO) method: This method assumes that the first items of stock purchased are the first items sold. Therefore, the cost of goods sold is calculated based on the cost of the oldest inventory and the cost of closing stock is based on the cost of the most recent inventory.

- Weighted Average method: This method calculates the average cost of all the inventory items available for sale during the year. The cost of goods sold and the cost of closing stock are then calculated based on this weighted average cost.

Conclusion:
Zebra Stores values its closing stock on GAAP principles and follows a systematic approach to stock taking and valuation. This ensures that the financial statements of the business provide an accurate reflection of the value of its inventory and thereby the profitability of the business.