Inventory Valuation Methods – FIFO

---

In case the company has a number of inventory items acquired during a particular period and having different prices, certain valuation methods has to be applied to calculate Cost of Goods Sold and value of the inventory remaining on hand. These methods are:

• FIFO (First-in-First-out)
• LIFO (Last-in-First-out)
• Average Price
• Exact price

---

FIFO (Fist-in-First-out)

---

Applying FIFO inventory valuation method for accounting purposes, it is assumed that inventory is sold in the order it is received from the supplier, i.e. the earliest acquired inventory items are being sold first.

The name of the method means, that item which was included in inventory first os sold first. The picture below demonstrates this principle.

• The company acquired 3 items acquired during July
• One item is sold

Applying FIFO inventory valuation method, it is assumed that earliest inventory item is sold

• Therefore Cost of Goods Sold will amount to $98 – cots of the inventory item acquired on July 5.
• Cost of inventory on hand, i.e. cost of closing inventory, will amount to the value of the inventory acquired the latest. These will be items acquired on July 12 and 20.

Further explore also other inventory valuation methods:

• LIFO
• Average Price
• Exact Price

---

FIFO Method – First In First Out – Visual Material

---

FIFO Method – First In First Out – Video

---

The Most Popular Accounting & Finance Topics:

---

Return from FIFO – First in First Out inventory valuation method to AccountingCorner.org