Treatment of opening stock and closing stock Posted by birendra kunwar on 9:49 PM

The stock is valued on the basis of manufacturing cost and production for the period . Under absorption costing , the fixed as well as variable manufacturing cost are included in total cost of production
In absorption costing , three types of stocks have to be valued on the basis of manufacturing cost . They are manufactured stock , opening stock .
The valuation of opening and closing stock depends upon the valuation method applied by the concern . In the case of first-in-first-out (FIFO) method, the beginning stock is valued on the basis of manufacturing cost of the previous period . However, the closing stock should be valued on the basis of production cost of the current period . If the manufacturing cost of the previous period is not given , the cost per unit of opening stock will be equal to the production cost for the current period . Sometimes the closing stock unit may be more than production units. In that case the excess units to production units is valued at the value of opening stock.
In the case of last-in-first-out (LIFO) , the ending stock is valued as same to the beginning stock. If the ending stock is more than the beginning stock, the excess units in beginning stock are valued at production cost of the current period . It should be mentioned in the question for an application of LIFO, otherwise FIFO method of stock valuation should be applied.