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Graded Discussion Board 02

Financial Accounting II (MGT401)


Topic: Valuation of Inventory

XYZ Ltd. is a manufacturer of readymade garments. Company’s accounts officer has suggested the management to change its accounting policy relating to inventory valuation method from weighted-average cost method (WAC) to first-in first-out (FIFO). It was considered that FIFO method reflects the usage of inventory more accurately in response of economic cycle.

Accounts officer has determined following differences, if company changes its inventory valuation method from weightage average method to first-in, first-out method.


Weighted Average Method (Rs.)

First-in, First-out  (Rs.)

Inventory at 1st January 2013



Inventory at 31st December 2013



Inventory at 31st December 2014



Inventory at 31st December 2015





a) On the basis of given data, you are required to mention that what will be the effect of change in inventory valuation method by filling the table given below.




Effect on Cost of Goods Sold

(simply mention that whether it will increase or decrease)

Effect on Profit

(simply mention that whether it will increase or decrease)


Change in Opening Inventory




Change in Closing Inventory




Change in Closing Inventory




Change in Closing Inventory




b) Justify your answer with logical arguments.

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Replies to This Discussion


yes dear u right

angel ki sari change hon g?

yes change the value its confirmed 

which value has to b changed?

angel ki yar

What about part B of GDB???


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