Inventories are the most important part of all business and
corporation Assets. Hence the method of valuation and its report
in the financial statements has tremendous effect on financial
position and the result of operation of the firm.
The inventories, due to the fact that they are continually
consumed and replaced are considered as dynamic and circulating
asset of corporation; and for this very characteristic the valuation
of such kinds of assets. Have primary importance.
The most fundamental objective of inventory accounting are as
follow: an effort to match the expense with revenue for
determination of net income, to value the inventory for the
financial position. Also the inventory valuation is important in
prediction of future cash flows of the .corporation.
One of the function of accounting theory is to find ways by
which to be able to measure the assets of corporation as better as
possible in order to provide usefull information for economic
decision making. In this article different method of inventory
valuation and it’s theortical reasons are discussed.
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