What method can a sole trader use to value inventory at the end of the accounting period?
Practice Questions
1 question
Q1
What method can a sole trader use to value inventory at the end of the accounting period?
FIFO
LIFO
Weighted Average
All of the above
A sole trader can use FIFO, LIFO, or Weighted Average methods to value inventory at the end of the accounting period.
Questions & Step-by-step Solutions
1 item
Q
Q: What method can a sole trader use to value inventory at the end of the accounting period?
Solution: A sole trader can use FIFO, LIFO, or Weighted Average methods to value inventory at the end of the accounting period.
Steps: 7
Step 1: Understand that inventory is the stock of goods a sole trader has for sale.
Step 2: Know that at the end of the accounting period, the value of this inventory needs to be calculated.
Step 3: Learn about the three common methods to value inventory: FIFO, LIFO, and Weighted Average.
Step 4: FIFO (First In, First Out) means the oldest inventory items are sold first, so you value inventory based on the cost of the most recent purchases.
Step 5: LIFO (Last In, First Out) means the newest inventory items are sold first, so you value inventory based on the cost of the oldest purchases.
Step 6: Weighted Average method calculates the average cost of all inventory items and uses that average to value the inventory.
Step 7: Choose the method that best fits the sole trader's business needs and accounting practices.
