Inventory valuation: Weighted average method
ID:CVWAVE

Video Overview

It is very important to accurately calculate and record inventory because inventory is divided between the inventory sold during the period, which is recorded as cost of sales in the Income Statement, and the inventory on hand at the period end or inventory unsold, which is recorded as inventory asset in the balance sheet. Remember there are two inventory recording methods, namely the perpetual method and the periodic method. A business must also choose an inventory valuation method to enable it to allocate inventory between cost of sales and closing inventory. There are two inventory valuation methods namely, the first-in-first–out method and the weighted average method. In this tutorial we will be discussing the weighted average method.