Explanation

SAP (Simple Average Price) is a method of stock valuation. It calculates the average cost per unit by dividing the total cost of goods available by the total number of units.

Under SAP, each time new stock is purchased, a new average price is calculated considering all available units. This average is then used to value both the cost of goods sold and closing inventory.

For example, if you have 10 units at ₦5 each and buy 10 more at ₦7 each, the SAP would be (₦50 + ₦70) ÷ 20 = ₦6 per unit. All sales and closing stock would be valued at ₦6 each.

Accrual is an accounting concept, not a stock valuation method. Advance and owing relate to payments, not stock valuation. Other stock valuation methods include FIFO (First In, First Out), LIFO (Last In, First Out), and WAP (Weighted Average Price, which is similar to SAP but recalculates more frequently).