PPT - Lifo and Fifo B Com Notes | EduRev

Cost Accounting

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B Com : PPT - Lifo and Fifo B Com Notes | EduRev

 Page 1


Fundamentals of Accounting
INVENTORY VALUATION
Page 2


Fundamentals of Accounting
INVENTORY VALUATION
Inventory
Inventory is the one of the largest 
current asset of a retail store or of a 
whole business merchandise. The sale 
of this inventory is the main source of 
revenue. 
Inventory contains materials/Products in 
three forms of conditions
Page 3


Fundamentals of Accounting
INVENTORY VALUATION
Inventory
Inventory is the one of the largest 
current asset of a retail store or of a 
whole business merchandise. The sale 
of this inventory is the main source of 
revenue. 
Inventory contains materials/Products in 
three forms of conditions
?Raw Materials
The materials needed to 
make anything are called 
raw materials.
The initial condition of 
any material is its raw 
form.
Some work is needed to 
make a raw material into 
something useful
Consider we were making 
something using steel
Steel in raw 
form
Page 4


Fundamentals of Accounting
INVENTORY VALUATION
Inventory
Inventory is the one of the largest 
current asset of a retail store or of a 
whole business merchandise. The sale 
of this inventory is the main source of 
revenue. 
Inventory contains materials/Products in 
three forms of conditions
?Raw Materials
The materials needed to 
make anything are called 
raw materials.
The initial condition of 
any material is its raw 
form.
Some work is needed to 
make a raw material into 
something useful
Consider we were making 
something using steel
Steel in raw 
form
?WIP (Work in process)
The process of making raw materials into 
some useful things
Steel is melted to reshape it 
into something useful
Page 5


Fundamentals of Accounting
INVENTORY VALUATION
Inventory
Inventory is the one of the largest 
current asset of a retail store or of a 
whole business merchandise. The sale 
of this inventory is the main source of 
revenue. 
Inventory contains materials/Products in 
three forms of conditions
?Raw Materials
The materials needed to 
make anything are called 
raw materials.
The initial condition of 
any material is its raw 
form.
Some work is needed to 
make a raw material into 
something useful
Consider we were making 
something using steel
Steel in raw 
form
?WIP (Work in process)
The process of making raw materials into 
some useful things
Steel is melted to reshape it 
into something useful
?Finished Good
The finished product formed after doing some 
work on raw material.
The price of finished product is considerably high from 
raw material
We can make numerous  useful products 
using same raw material
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