method used to value closing inventory

method used to value closing inventory is a critical aspect of inventory management and accounting. Several methods are commonly used to determine the value of inventory at the end of an accounting period, including the FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and weighted average methods. FIFO assumes that the oldest inventory items are sold first, which can be important during periods of rising prices. LIFO assumes the newest inventory items are sold first. The weighted average method calculates the cost of goods sold and inventory based on the average cost of all items in stock. The choice of method can affect a company’s financial statements, tax liabilities, and profitability analysis.