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Definition

An accounting measure which endeavours to measure the cost of the goods sold during the accounting period. The method is to value the inventory (stock) at the start of the period (the opening stock) and at the end of the period (the closing stock). Then add opening stock to the purchases during the period and subtract the closing stock. Normally, prices of purchases will rise during the period so that stock purchased towards the end of the period will be more expensive than stock bought at the start of the period. For this reason, the method of valuing the closing stock will have an impact on the cost of sales figure.

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