Course Content
Accounting Principles and Standards, Preparation of Financial Statements
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Accounting Concepts and Principles: Theoretical Framework
Accounting Standards : IFRS, IAS & GAAP
Responsibilities of IASB
Indian Accounting Standards (Ind AS)
Types of Account
Types of Expenditure
Financial Statement Analysis: Ratio Analysis, Funds Flow and Cash Flow Analysis, DuPont Analysis
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Financial Statements List
Important Terms
Ratio Analysis
Funds Flow Analysis
Flow of Funds
Cash Flow Analysis
Ind AS 7: Cash Flow Statement
DuPont Analysis
Preparation of Cost Sheet, Marginal Costing, Cost-Volume Profit Analysis
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Important Principles in Cost Accounting
Implicit Cost & Explicit Cost; Accounting Profit & Economic Profit
Law of Diminishing Returns
Economic Theory of Production
Production Theory in Micro Economics
Special Types of Costs
Cost Theory in Economics
Short-Run Costs in Perfect Competition
Marginal Revenue & Profit Maximizing Rule
Shutdown Rule in Short Run
Short Run in Monopoly
Preparation of Cost Sheet
Fixed Costs (F.C.) , Variables Costs ( V.C.) and Contribution Margin
P/V ratio ( Profit / Volume ratio)
Break Even Point (B.E.P.) & Margin of Safety (M.O.S.) & Law of Diminishing Return
Cost-Volume Profit Analysis
Standard Costing & Variance Analysis
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Inventory Valuation Method
Standard Costing
Material Variance
Volume Variance
Overhead Absorption Rate
Overhead Expenditure Variance
Variable Overhead Cost Variance
Overhead Spending Variance
Labour Efficiency Variance
Unit IV: Managerial Accounting

✅ Inventory valuation methods are accounting approaches used to determine the cost assigned to inventory at the end of an accounting period and the cost of goods sold (COGS) during the period. These methods play a crucial role in preparing accurate financial statements and in understanding a company’s profitability and asset management.

Purpose of Inventory Valuation:

Inventory valuation helps in:

  • Determining cost of goods sold (COGS)

  • Calculating gross profit and net income

  • Valuing ending inventory on the balance sheet

  • Complying with accounting standards and tax regulations

Common Inventory Valuation Methods:

1. First-In, First-Out (FIFO):

  • Assumes the oldest inventory items are sold first.

  • Ending inventory reflects the most recent costs.

  • Often aligns with the physical flow of goods.

2. Last-In, First-Out (LIFO):

  • Assumes the most recently purchased items are sold first.

  • Ending inventory consists of older costs.

  • Common in industries where inventory costs fluctuate frequently.

  • Permitted under U.S. GAAP, but not allowed under IFRS.

3. Weighted Average Cost:

  • Calculates the average cost per unit of inventory by dividing the total cost of goods available for sale by the total units available.

  • Smooths out price fluctuations.

  • Suitable when inventory items are indistinguishable or homogeneous.

4. Specific Identification:

  • Tracks the actual cost of each individual item sold and remaining in inventory.

  • Used for high-value, unique items (e.g., cars, jewelry).

  • Most precise method but impractical for large-volume inventory.

Key Considerations:

  • The choice of inventory method affects financial results, including profits and taxes.

  • It must be applied consistently over time for comparability.

  • Companies may choose a method based on cost behavior, business model, or regulatory requirements.

✅ Summary:
Inventory valuation methods are essential tools in accounting that influence how a business records the cost of inventory and reports profit. Choosing the appropriate method ensures accurate financial reporting and informed decision-making.

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