Free inventory tool
Stock valuation: FIFO and weighted average, side by side.
Enter your opening stock, purchases and sales for one item. You get closing stock, cost of goods sold and gross profit by FIFO and by weighted average, with the working for each.
- AS 2, Ind AS 2 and ICDS II
- Layer-by-layer working
- Nothing is sent or saved
Stock valuation calculator
The rules it follows.
From AS 2 and Ind AS 2, the accounting standards on inventories, as ICAI publishes them.
Inventories are valued at the lower of cost and net realisable value.
Source: AS 2 (revised 2016), para 5; Ind AS 2, para 9, checked 17 Oct 2026
The cost of purchase is the price, with duties and taxes other than those later recoverable from the tax authorities, freight inwards and other costs of buying. Trade discounts and rebates are deducted.
Source: AS 2 (revised 2016), para 7, checked 17 Oct 2026
GST paid on purchases is not part of closing stock when it is taken as input tax credit.
Source: ICAI, Handbook on Finalisation of Accounts with GST Perspective (June 2026), Q.19, checked 17 Oct 2026
Items that are ordinarily interchangeable are costed by FIFO or weighted average. Items that are not, or goods kept for a specific project, are costed one by one.
Source: AS 2 (revised 2016), paras 14 and 16, checked 17 Oct 2026
FIFO assumes the items bought first are sold first, so closing stock is the latest purchases. The weighted average may be worked out for the period, or again as each shipment is received.
Source: Ind AS 2, para 27 (ICAI compendium 2025-26), checked 17 Oct 2026
The same cost formula is used for all inventories of a similar nature and use.
Source: Ind AS 2, para 25 (ICAI compendium 2025-26), checked 17 Oct 2026
Last in, first out (LIFO) is not permitted under AS 2 or Ind AS 2.
Source: ICAI study material, Cost and Management Accounting, Material Cost, p. 2.53, checked 17 Oct 2026
Net realisable value is the expected selling price, less the costs to complete and to sell.
Source: AS 2 (revised 2016), para 3.2, checked 17 Oct 2026
One example, three answers.
A trader starts April with 100 cartons at ₹500. The price rises with each purchase: 200 at ₹550, 300 at ₹600, then 150 at ₹640. 450 cartons are sold for ₹3,70,000: 250 at ₹800 and 200 at ₹850.
- Opening stock + purchases750 cartons
- 4,36,000
- FIFO: cost of goods sold
- 2,50,000
- FIFO: closing stock150 × ₹600 + 150 × ₹640
- 1,86,000
- Periodic average: cost of goods sold450 × ₹4,36,000 ÷ 750
- 2,61,600
- Periodic average: closing stock300 × ₹581.33
- 1,74,400
- Moving average: cost of goods sold
- 2,51,428.57
- Moving average: closing stock300 cartons, ₹615.24 each
- 1,84,571.43
- Gross profit by FIFO, ₹
- 1,20,000
Same goods, same sales. Gross profit is ₹1,20,000 by FIFO, ₹1,18,571.43 by the moving average and ₹1,08,400 by the periodic average.
An illustration in ₹, rates without GST. With prices rising, FIFO leaves the dearer units in stock, so it shows the highest closing stock and profit. When prices fall, it is the other way round.
What it does not cover.
One traded item, bought and sold. Check these before you use the figure in your accounts.
Income tax: ICDS II
For working out taxable income, ICDS II also allows only FIFO or weighted average. But it counts taxes and duties paid in the cost, where AS 2 leaves out the ones you get back. Your tax adviser makes that adjustment.
ICDS II prescribes the “inclusive method”, while AS 2 and Ind AS 2 prescribe the “exclusive method” for recoverable taxes.
Source: ICAI, Technical Guide on ICDS (2017), ICDS II para 6.1, checked 17 Oct 2026
Composition dealers
A dealer under the composition scheme can’t claim input tax credit, so GST paid on purchases is part of the cost. Enter rates with GST.
GST paid on purchases becomes a cost to a composition dealer, who cannot avail input tax credit.
Source: ICAI, Handbook on Accounting Treatment under GST (2019), checked 17 Oct 2026
Goods you make
Finished goods and work in progress also carry conversion costs: labour and production overheads. The calculator values bought-in goods only.
Cost of inventories includes all costs of purchase, costs of conversion and other costs of bringing them to their present location and condition.
Source: AS 2 (revised 2016), para 6, checked 17 Oct 2026
Standard cost and the retail method
Many businesses value stock at a standard cost, and shops sometimes from the selling price less a margin. Both are allowed only when the result is close to actual cost.
The standard cost method or the retail method may be used for convenience if the results approximate the actual cost.
Source: AS 2 (revised 2016), para 18, checked 17 Oct 2026
Many items
The calculator values one item. Net realisable value is compared item by item, not on the total stock.
Inventories are usually written down to net realisable value item by item, not by a whole class such as all finished goods.
Source: AS 2 (revised 2016), para 21, checked 17 Oct 2026
Returns, discounts and freight
Enter each purchase at its landed rate: after trade discounts, with freight inwards and any tax you can’t claim back. Enter a purchase return as a smaller purchase.
More inventory tools.
How much to order, when to reorder, and what your stock is worth. And the tools that go with this one.
Stock valuation questions people ask.
Which stock valuation methods are allowed in India?
For goods that are interchangeable, FIFO or weighted average, under AS 2, Ind AS 2 and, for income tax, ICDS II. Goods that are not interchangeable, or are kept for a specific project, are costed one by one. Standard cost and the retail method may be used if they come close to actual cost.
Is LIFO allowed in India?
No. LIFO is not permitted under AS 2 or Ind AS 2, and ICDS II allows only FIFO or weighted average.
What is the difference between periodic and moving weighted average?
The periodic average works out one cost a unit for the whole period: opening stock plus purchases, divided by the units. The moving average works out a new cost after each purchase, and each sale goes out at the average on its date. Both are allowed.
Which gives a higher profit, FIFO or weighted average?
When prices are rising, FIFO: the cheaper, older units go into cost of goods sold and the dearer ones stay in stock. When prices are falling, the weighted average. Over the life of the stock the total is the same; only the timing differs.
Should closing stock include GST?
Not the GST you take as input tax credit: it is recovered, so it is not part of cost. GST you can’t claim back, as for a composition dealer or blocked credit, is part of cost.
What is “lower of cost and net realisable value”?
Stock is shown at what it cost, unless it can now be sold for less, after the costs to finish and sell it. Then it is written down to that lower figure, so the accounts don’t carry a loss you already expect.
Can I change from FIFO to weighted average?
The standards expect one formula for all stock of a similar nature and use. Switching changes how this year’s profit compares with last year’s, so talk to your auditor first.
Is what I type saved or sent anywhere?
No. The figures are worked out in your browser. Nothing is sent, stored or tracked by the calculator.
Can PrimoERP value my stock this way?
Yes. PrimoERP values every receipt and issue at FIFO, weighted average or standard cost, chosen for each item category. Choose before your first stock movement: once stock has moved, the method stays, so past values never change.
— the PrimoERP team
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