The cost method to value inventory is a system used to account for the value of goods and materials held in stock. This method utilizes historical records to identify the cost incurred when purchasing the items being inventoried and then subtracts any specific losses in value due to physical deterioration, obsolescence or technological advancement. The end result is essentially an assigned dollar value that accounts for the current market value of said inventory. By using the cost method, businesses can properly account for their inventory on their balance sheets and gain an accurate understanding of their financial standing.