The GAAP method for obsolete or slow moving inventory is to account for all inventory using either market value or cost method. The method which results in the lower amount is the one that is used.

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Moving average inventory method is not GAAP (generally accepted accounting principles). LIFO (last in, first out) or FIFO (first in, first out) are GAAP. FIFO is the most common method and easy to compute; however LIFO may be used but is much more complicated to compute unless your businesses computer system computes the LIFO computation.

Weighted average inventory valuation method is method in which inventory purchased at any price is put together to calculate one price for allocation in contrast to FIFO or LIFO.

Average Cost Method: Under this method average cost is calculated by following farmula:

Average cost of unit= Total cost of inventory / total number of units