Evaluation of FIFO & AVCO

Advantages and disadvantages of FIFO & AVCO methods-stock valuation

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  • Created by: Sana
  • Created on: 27-12-11 18:18

EVALUATION OF STOCK VALUATION

FIFO AND AVCO ARE BOTH ACCEPTABLE METHODS FROM A TAXATION POINT OF VIEW.

FIFO IS MORE REALISTIC, WHEREAS AVCO NEVER USES ACTUAL PRICES PAID.

FIFO GIVES YOU HIGHER PROFITS IN THE SHORT RUN IN TIMES OF RISING PRICES

FIFO IS MUCH EASIER TO CALCULATE THAN AVCO WHICH REQUIRES A NEW CALCULATION TO BE CALCULATED EACH TIME A NEW PURCHASE IS RECIEVED.  

THIS ENTAILS THE CONCEPT OF CONSISTENCY FROM ONE FINANCIAL YEAR TO THE NEXT.

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