Weighted Average Inventory Valuation: Moving vs Periodic Formulas & AS 2 SOP
Weighted Average Inventory Valuation: Moving vs Periodic Formulas & AS 2 SOP
Comprehensive guide for inventory managers and cost accountants on calculating moving average stock costs, handling price volatility, and Tally Prime stock setup.
Who is this for: Inventory Valuation SOP
Quick Answer: How Is Weighted Average Stock Valuation Calculated?
Weighted Average calculates stock cost by dividing Total Cost of Goods Available for Sale by Total Units Available. Under moving average, the unit cost is dynamically updated after every new purchase entry: New Unit Cost = (Existing Stock Value + New Purchase Cost) ÷ (Existing Units + New Units).
- AS 2 and Ind AS 2 approve Moving Weighted Average for interchangeable stock.
- Smooths out profit swings during periods of high purchase price volatility.
- Recalculates unit cost immediately after every purchase receipt voucher.
- TallyPrime Stock Item Valuation Method supports Moving Average natively.
1. Moving Average Formula & Step-by-Step Calculation
Moving Weighted Average Formula:
Updated Rate = (Existing Value + New Bill Cost) ÷ (Existing Qty + New Qty)
This rate is applied to all subsequent sales vouchers until the next purchase bill arrives.
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