Accounting: The Language of Business - Vol. 2 (Intermediate: Part 162)

Exodus 23:7

"Distance yourself from a false matter". This verse can be interpreted as a warning to accountants and auditors to be careful about what they certify.

 Short-Term Operating Assets: Inventory (Part H)

by

Charles Lamson

Moving-Average Method 

The moving-average method determines an average cost for the units on hand and applies that average unit cost to the next sale to determine the cost of goods sold. The term moving-average method, is used in a perpetual inventory system (a computerized system that tracks inventory changes in real time, eliminating the need for physical inventory counts). Under a periodic inventory system (an accounting method that involves physically counting inventory at set intervals, such as quarterly, semi-annually, or annually), this approach is generally referred to as the weighted-average method. The ending inventory is the remaining (unsold) units valued at the average unit cost as shown in Example 10.7. The moving average method is useful for firms selling a high value of a homogeneous product (e.g., oil and gas) and is often used for inventory of raw materials and supplies.

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 519-521*

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