Some Implications of the First in-First out Method of Stock Valuation

SOME discussion has recently been centred around two conceptions of stock valuation, referred to succinctly as 'the value of the movement' and 'the movement of the value', respectively. The former is, I suppose, favoured by most economists; the latter is the method used in practice by accountants. The former method is employed, inter alia, in ascertaining stock accretions for purposes of statistics of national income and investment; it involves computing the current cost value of the movement in the volume of stock. The latter is concerned with calculating the profits of individual firms, and part of this profit is represented by an increase in the value of stocks since the date of the previous accounts. The movement in the value of stocks as shown by actual accounts is not the same as the value of additions to quantity because under the present accounting system the whole of the opening stocks are regarded as sold and as replaced by new stocks at different cost prices. The movement in value is therefore composed of two elements

Econometrics · Economics · Financial economics · Geography · Stock (firearms) · Valuation (finance) · Finance · Financial Reporting and Valuation Research