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Inventory Valuation |
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Inventory Valuation In accounting, any way to estimate and report how much a company's inventory is worth. There are two primary ways to calculate inventory valuation. The first in, first out technique treats inventory acquired first as if it were sold first. That is, the sale of inventory is recorded against the purchase price of the oldest inventory, even if the physical goods are not the same. The last in, first out technique does the opposite: it records sales against the purchase price of the most recently acquired inventory. Both of these techniques are designed to estimate the value of inventory in a way that will decrease the company's tax liability while not reducing the book value of its assets.
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