Cost Accounting: The Four Elements Of Inventory Valuation

2.2.1. Price Inventory valuation depends on price and quantity; Price is the first element for valuation of inventory. Price covers two issues. First issue is compliance with established law of the country. Second issue is associated with manner of calculation.

2.2.1.1. Legal Aspect

Accounting Standard-2, states that current assets should be determined at lower of cost and market price on closing day. The cost is calculated according to the First-In-First-Out method, the weighted average value method or any similar methods. The cost is the expenses for purchasing assets or manufacturing assets. Market value is the sales price net of calculated sales costs. Companies can use FIFO method or weighted average value method for determining the

stated that IT is an essential tool, but not truly effective independently. It is a supportive tool [36]. Cragg et al. mentioned that to have an impact on performance IT needs to be coupled with other factors such as business strategy [37]. King et al. have argued that firms having extensive IT resources can be at a competitive edge by deploying them in support of or to strengthen their business [38]. Murphy et al. stated that to be successful international freight forwarders Electronic Data Interchange is an important tool in the hands of logistic organizations. EDI transfer data in an agreed electronic format, such as in-voices, bills, and purchase orders, between companies [39]. Yan Cheng et al. mentioned that with the use of EDI to support a Vendor-Managed Inventory strategy not only bullwhip effect can be eliminated but overall performance of the supply chain is also enhanced. In VMI supplier is responsible for monitoring and restocking customer inventory at the appropriate time to maintain predefined levels. The vendor is given access to current customer inventory and forecast and sales order information to initiate replenishment as required. VMI directly links suppliers to a manufacturing base and EDI is then applied to generate material "pull" signals. IT also shortens delivery lead time [40]. Frohlich et. Al. examined IT from the Internet dimension [41]. Brynjolfsson et al found that Internet technology has significantly enabled VMI, Electronic Fund

have found that lean production is a multi-dimensional construct consists of multiple lean practices such as total quality control, total productive maintenance, and just-in-time. Lean production implementation positively affect financial performance and results in improved operational performance in terms of inventory management, process control, information flows, human factors, delivery, flexibility and quality. [43]. Balakrishnan et al. have compared the financial performance of a group of firms who adopted lean production and an equal number of similar firms that had not. There is significant increase in inventory turnover in the treatment group as comparative to the control group, There is no significant differences in ROA. His also found that small firms do not benefit from lean production adoption as much as large firms [44]. Kinney et al. have found that there is improvement in profitability for firms that implement lean production compared to those that do not [45]. Swamidass et al. have investigates effects of implementation of lean production on Inventory performance of U.S. manufacturing firms. They group firms by performance and finds that better performing firms have improved their inventory management performance, as measured by total inventory-to-sales ratio [46]. Cannon et al. have uses a hierarchical linear model to explore the effects of changes in inventory turnover on firm performance which is measured by ROA, ROI, market value added,