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CA Intermediate · Advanced Accounting · AS 2 Valuation of Inventory

Ravi Traders Ltd. had these purchases of one item: opening stock 100 units at ₹50; purchase 1 on 5 May 200 units at ₹55; purchase 2 on 20 May 300 units at ₹60. Sales in May were 450 units. Under FIFO, what is the closing stock value at 31 May?

Closing stock under FIFO is ₹9,000. Of 600 units available, 450 are sold, leaving 150 units. FIFO assumes the oldest units are sold first, so the remaining units come from the latest purchase at ₹60 each, giving 150 x 60 equals ₹9,000.

  1. A₹8,500
  2. B₹9,000Correct
  3. C₹9,500
  4. D₹8,000

Explanation

Total units available = 600; sold 450, so closing 150 units. Under FIFO, closing stock consists of the latest purchases: 150 units at ₹60 = ₹9,000. Weighted average would give a different value, and taking the earlier layers would understate the figure.

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