Inventory Costing Decoded
How do you calculate profit when you buy the same item at different prices throughout the year? First-In, First-Out (FIFO) assumes the oldest stock is sold first, providing a realistic cost of goods sold (COGS).
The Benefits of FIFO
- Tax Compliance: Preferred by tax authorities worldwide for its realistic margins.
- Prevents Expiry Losses: FEFO/FIFO naturally promotes selling oldest stock first.
- Accurate Asset Valuation: Keeps ending inventory valuation aligned with current market replacement costs.
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