About valuation of closing stock of gold firm

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Bharat Kothari (Querist)
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28 March 2016 Sir/mam, plz guide me, I am a gold n silver retailer in the state of Maharashtra. plz tell me how should I calculate my closing stock of gold and silver. I know AS2 very well so then I know the market price of it (wt * current market rate)but what about cost price how will I calculate my cost price of that gold n silver which I have purchased in different rates + I do have my opening stock too. I do know the fifo lifo avg methods too. all I need ro know is how to apply all this things (market value, cost, fifo/lifo/avg) all together. what will be the typical calculation/ procedure. eg. closing stock of gold 5 kg.

Bharat Kothari

Bharat Kothari (Querist)
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29 March 2016 plz reply..... anybody

Bharat Kothari

Bharat Kothari (Querist)
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30 March 2016 is there nobody to ans my questions

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Asha Kanta Sharma

Asha Kanta Sharma

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14 July 2024 Calculating the closing stock of gold and silver for your retail business involves integrating various accounting principles and methods like market value, cost price, and inventory valuation methods (FIFO, LIFO, average cost). Here’s a step-by-step guide on how to approach this:

### 1. Determine Opening Stock

Firstly, you need to know the value and quantity of gold and silver you had at the beginning of the accounting period (usually the financial year). Let's denote:
- **Opening Stock Quantity**: Gold and silver in kilograms (kg).
- **Opening Stock Cost**: Total cost value of the opening stock.

### 2. Purchases During the Year

Throughout the year, you would have purchased additional quantities of gold and silver at different rates. For each purchase:
- Record the quantity purchased.
- Record the purchase price per unit (cost per gram or per kilogram).

### 3. Inventory Valuation Methods

You mentioned FIFO (First In, First Out), LIFO (Last In, First Out), and average cost method. Here’s how each method works briefly:

- **FIFO**: Assumes that the items you purchased or produced first are sold or used first. To calculate closing stock using FIFO:
- Start with the oldest inventory (opening stock or earliest purchase).
- Add purchases during the year in chronological order.
- Calculate the cost of goods sold (COGS) based on the oldest inventory available.

- **LIFO**: Assumes that the most recently produced or purchased items are sold first. LIFO is less common in many jurisdictions, including India, due to regulatory and tax considerations.

- **Average Cost**: Calculate the weighted average cost of all inventory items available for sale during the period. To calculate average cost:
- Divide the total cost of goods available for sale (opening stock cost + purchases during the year) by the total quantity of goods available for sale (opening stock quantity + purchases during the year).

### 4. Calculate Cost of Goods Sold (COGS)

To calculate COGS, you will use the inventory valuation method chosen (FIFO, LIFO, or average cost):
- Sum up the cost of goods sold during the year based on the chosen method.

### 5. Closing Stock Calculation

Finally, calculate the closing stock of gold and silver using the same method (FIFO, LIFO, or average cost):
- Apply the method to the remaining inventory after deducting the COGS from the total inventory available for sale (opening stock + purchases).
- Determine the quantity and cost of the remaining inventory (closing stock).

### Considerations:

- **Market Value Adjustment**: The closing stock should reflect the lower of cost or net realizable value (market value) as per accounting standards.
- **Accounting Standards**: Ensure compliance with applicable accounting standards (such as Indian Accounting Standards or AS2) for inventory valuation and disclosure.

It’s advisable to consult with a qualified accountant or tax professional to ensure accurate application of inventory valuation methods and compliance with regulatory requirements specific to your business in Maharashtra.