Resources  ❯  Accounting Terms

Total Inventory Method

[TOH-tuhl in-ven-tuh-ree meth-uhd]

What is the definition of Total Inventory Method?
A lower-of-cost-or-market method of valuing inventory, which requires that inventory be reported at the lower of its historical cost or current market value.
Using Total Inventory Method in an Example

Under the total inventory method, if a company purchased goods at $5000 but the market value at the end of the accounting period is $4500, the inventory is recorded on the balance sheet at $4500, reflecting the lower market value rather than the cost.

Using Total Inventory Method in a sentence

During the quarterly review, the CFO mentioned that applying the total inventory method allowed the company to adjust its inventory valuation to reflect current market conditions, thereby providing a more accurate financial outlook.

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