Note: FIFO, AVCO and LIFO methods of inventory valuation will not be examined
AQA will never ask you to calculate inventory value using FIFO, AVCO or LIFO. You only need to know that inventory exists as a figure — not how to work it out.
Formula
Inventory Value = Lower of Cost or Net Realisable Value
Real World
Marks & Spencer writes down unsold seasonal clothing to its expected sale price when that falls below cost — applying the lower of cost or net realisable value rule without needing FIFO or AVCO calculations.
Exam Focus
If asked about inventory valuation, apply the prudence concept and the lower of cost or NRV rule — FIFO/AVCO/LIFO will never be required.
How well did you know this?