AVCO stands for Average Cost Method, an inventory valuation method applied to calculate the cost of goods sold and end inventory by averaging the cost of all items available for sale during the period.
In the context of accounting within the USA, the ceiling is an amount equivalent to the net realizable value of an asset. When using the lower of cost or market method for inventory valuation, the market value cannot exceed this upper limit.
A 'Change in Accounting Method' refers to an alteration in the overall method of accounting or a change in a material item used in an overall accounting plan. This could involve changes such as switching from cash basis accounting to accrual basis accounting, or altering inventory valuation methods.
In the USA, a method of expressing the value of an inventory in monetary values rather than units. Each homogeneous group of inventory items is converted into base-year prices using appropriate price indices. The difference between opening and closing inventories is measured in monetary terms of the change during the accounting period.
Effective Units, a concept closely linked with Equivalent Units, are used in cost accounting to determine the cost per unit in a production process, especially when dealing with incomplete goods. The aim is to assign accurate costs to partially completed items.
FIFO, or First In, First Out, is an inventory valuation method where the oldest inventory items are recorded as sold first. This method is commonly used in accounting and finance to manage inventory costs.
FIFO Cost, short for First-In-First-Out Cost, is an inventory valuation method where the costs of the earliest items purchased are the first to be recognized in financial statements. This method is widely used in accounting to manage inventory and calculate the cost of goods sold.
A method of inventory valuation in which cost of goods sold is charged with the cost of raw materials, semi-finished goods, and finished goods purchased 'first.' Under FIFO, the inventory contains the most recently purchased materials, and in times of rapid inflation, FIFO can inflate profits.
A method of valuing raw materials or finished goods by using the earliest unit value for pricing issued items until all stock received at that price has been used up. This method is significant in inventory management and accounting, ensuring a logical and often tax-efficient way to evaluate inventory costs.
An inventory certificate is a management representation to an independent auditor regarding the inventory balance on hand. It typically details the method used in computing inventory quantity, pricing basis, and condition.
Inventory Valuation involves determining the monetary worth of raw materials, work-in-progress, and finished goods, as prescribed by specific accounting standards. It plays a critical role in both financial and management accounting.
A method of inventory valuation in which the most recent items acquired are considered the first to be sold. It affects accounting and taxation outcomes, particularly in periods of rising prices.
A method of valuing units of raw material or finished goods issued from stock by using the latest unit value for pricing the issues until all the quantity of stock received at that price is used up.
LIFO (Last-In-First-Out) is an inventory valuation method where the most recently produced items are considered sold first.
The method of valuing current assets and work in progress as required by UK generally accepted accounting practice and the Companies Act; however they are measured in a company's management accounts.
The 'Lower of Cost or Market (LCM)' principle is a conservative accounting convention that dictates that inventory should be reported at either its historical cost or its current market price, whichever is lower.
The Lower of Cost or Market (LCM) accounting method involves recording inventory at its historical cost but writing it down to market value if that is lower. Market value is defined as replacement cost, capped by net realizable value (NRV) and cannot be less than NRV minus a normal profit margin.
A costing and decision-making technique that charges only the marginal costs to the cost units and treats the fixed costs as a lump sum, deducting from the total contribution to obtain the profit or loss for the period.
Net Realizable Value (NRV) represents the estimated selling price of an asset in the ordinary course of business, minus any predictable costs associated with the completion and sale of the asset. It is a critical metric in inventory valuation and accounting practices, ensuring realistic asset values are reflected in financial statements.
NIFO cost is a method of valuing units of raw material or finished goods issued from stock by using the next unit price at which a consignment will be received for pricing the issues.
The inventory of raw materials held at a specified time, which appears on the balance sheet under the heading of current assets.
Total Absorption Costing allocates all manufacturing costs to products, ensuring all costs related to production are accounted for in the valuation of inventory and cost of goods sold.
Uniform Capitalization Rules (UNICAP) are a method of valuing inventory for tax purposes, requiring the capitalization of direct costs and an allocable portion of indirect costs related to production or resale activities. These costs must be included in the basis of property produced or in inventory costs and are then recoverable through depreciation, amortization, or as cost of goods sold.
Variables sampling is a statistical method used primarily in auditing to predict the value of a given variable within a population. It is often used to estimate the total amount or the arithmetic mean of a characteristic within a sample.
A method of valuing inventory that calculates the cost of goods sold and ending inventory based on the average cost of all units available for sale during the period.
