Series 2, Episode 6 - Inventory Valuation – FIFO, AVCO & IAS 2

In this episode of Debit, Credit, Done! we’re tackling inventory valuation — a key area of the AAT Level 3 Financial Accounting: Preparing Financial Statements module.

We’ll cover:

Why accurate inventory valuation matters for profit and assets

IAS 2 rules: lower of cost and net realisable value (NRV)

FIFO (First-In, First-Out) explained with examples

AVCO (Average Cost) worked through step by step

How to apply NRV adjustments when values fall

A full worked example combining purchases, sales, and NRV

You’ll also get AAT exam tips on spotting NRV adjustments, showing full workings, and avoiding common traps.

🎙 Challenge: Try the FIFO example at the end of the episode to check your understanding before Monday’s release!