Implication of Choice of Inventory Valuation Methods on Profit, Tax and Closing Inventory

The study examined the implication of the choice of inventory valuation methods on profit, tax and closing inventory. Calculations were made to find out the impact of the FIFO and Weighted Average methods of inventory valuation on profit, tax and closing inventory using practical illustration. Also 47 knowledgeable individual’s opinions were sampled in testing the existence of significant correlation between the choice of inventory valuation method and profit, tax, and closing inventory using the Pearson product moment correlation. From the study, it was discovered that the choice of inventory valuation methods impact directly on the profit, tax and closing inventory of any company and also confirmed the existence of a very strong significant correlation between the choice of inventory valuation method and profit, tax and closing inventory. Consequently, the researchers concluded that choice of inventory method has much impact on the dependent variables of the study hence the need for companies to critically examine the methods of inventory valuation before making choice.