A mathematical walkthrough of moving-average inventory valuation during supply inflation and currency fluctuations.
XpertPOS Editorial Practice
Commercial Enterprise Architecture Team
FIFO creates tax liabilities during rapid inflation by matching today's high sales revenue against months-old cheap stock. LIFO is not compliant with accounting standards. Moving weighted average provides the most realistic operational picture.
Core Problem Factors
Common errors in manual costing.
Assuming all 500 units in stock cost Rs. 150 because the latest 20 units arrived at Rs. 150.
New Average Cost = [(Existing Qty x Existing Avg Cost) + (New Qty x New Purchase Price)] / Total New Qty.
Executed automatically whenever a Purchase Receiving Voucher is posted.
Seeing moving average in action.
100 units @ Rs. 100 = Rs. 10,000.
50 units @ Rs. 130 = Rs. 6,500. Total 150 units = Rs. 16,500.
Add carriage and unloading costs into the receiving voucher before computing moving average.
Yes, foreign currency purchases are converted to base currency (PKR) at current exchange rates upon inward.
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Topic Cluster Hub
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