How to Value Closing Stock

Most stores use a last-in, first-out stock valuation method.

The closing valuation of stock is a process that accounts for inventory purchased and sold during a given period. This process is necessary for annual tax reporting, inventory purchase control and loss prevention. Keeping track of stock also maintains current asset values, which is essential information for investors.



The most common valuation is LIFO (Last in First Out).

Things You'll Need

• Beginning inventory
• Inventory purchased
• Units sold
• Calculator

Instructions

Closing Stock Valuation for LIFO

1. Determine beginning inventory. This is last year's ending inventory. If this is the first year in business, the beginning inventory is $0.

2. Calculate inventory purchases made. Organize the purchases in chronological order, starting with the first purchase.

3. Calculate total sales made.

4. Deduct sales figures chronologically from the inventory purchase list. Begin with the latest purchase date for the LIFO method.

5. Determine the value of closing stock.

   For example:

   Stock purchases:

   January $100

   March $250

   October $500

   Total sales for period $650. Working backward, the end value is $200.

References

• Closing stock
• Stock valuation methods