---
title: "Inventory valuation"
description: "What is inventory valuation? The money value of the stock you hold, set by a costing method. Learn the common methods and why stock and the ledger must agree."
url: https://1flux.ai/glossary/inventory-valuation
last_updated: 2026-10-10
---

[Procurement and inventory](https://1flux.ai/glossary#procurement-and-inventory)

# Inventory valuation

What is inventory valuation, and why should it always agree with the ledger?

Glossary Updated 10 October 2026

Definition

Inventory valuation is the money value a business assigns to the stock it holds, calculated by applying a costing method to the quantities on hand.

## What is inventory valuation used for?

The value appears as an asset on the balance sheet, and the cost of stock sold becomes [cost of goods sold](https://1flux.ai/glossary/cost-of-goods-sold), so the method chosen directly affects reported profit. Common methods are [weighted average cost](https://1flux.ai/glossary/weighted-average-cost), FIFO and standard cost; IFRS doesn’t permit LIFO.

Example: 400 units on hand at a weighted average of USD 7.50 are valued at USD 3,000.

The valuation should agree with the inventory account in the general ledger. When stock reports and accounts disagree, it’s usually because stock and journals are posted separately. Read [why your stock report and your accounts never agree](https://1flux.ai/blog/stock-and-accounts-disagree).

In 1flux

Every stock posting writes the quantity, its cost layers and a balanced journal together, so stock and the ledger stay in step, and a “Stock vs ledger” check flags any difference. Valuation, cost audit and reconciliation reports export to CSV. [See inventory costing and valuation](https://1flux.ai/products/inventory/costing-and-valuation)

Related

## Keep exploring

### [Weighted average cost](https://1flux.ai/glossary/weighted-average-cost)

A costing method that values all units at their average cost.

### [FIFO](https://1flux.ai/glossary/fifo)

A costing method that uses the oldest purchase costs first.

### [Standard cost](https://1flux.ai/glossary/standard-cost)

A set cost per item, with differences recorded as variances.

### [Costing and valuation](https://1flux.ai/products/inventory/costing-and-valuation)

Weighted average, FIFO or standard cost per company, with cost layers you can audit.

Last updated 10 October 2026