1) Manufacturing and retailing businesses usually hold stock (or stock in trade) such as: a) Raw materials/components b) Work in progress c) Finished goods d) Goods for resale e) Staff f) Receipts 2) Why there is a need for stock valuation? a) Opening/closing stock does not appear on trading account, closing stock appears on balance sheet ascurrent asset b) If accounts produced more than annually, business needs regular stock valuations c) Opening/closing stock appears on trading account, closing stock appears on balance sheet ascurrent asset d) Businesses need to value of stock for final accounts e) Physical stock takes may be carried out to confirm value of stock in the accounts 3) How is stock valued? a) According to IAS2 - Inventories stock should be valued at either its cost or net realisable value (whichever is lower) b) According to IAS2 - Inventories stock should be valued at either its net realisable value or cost (whichever is higher) 4) Stock valuation for group of items  a) IAS 2 - Inventories states that individual items of stock should be valued separately b) IAS 2 - Inventories states that individual items of stock should not be valued separately c) May not be practical – groups of similar items are therefore valued together(e.g. nuts, bolts, washers etc (fastenings) in an engineering company)

Stock valuation -Management Accounting - AAT 2 & 3

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