All 5 Inventory Valuation (FIFO/LIFO/AVCO) questions
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How do FIFO, LIFO and AVCO differ during rising prices? Work out closing inventory using AVCO. What does 'lower of cost and net realisable value' mean (IAS 2)? Is LIFO permitted under IFRS, and why?
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Financial Accounting › Inventory Valuation (FIFO/LIFO/AVCO)

What is the FIFO method of inventory valuation?

Beginner

Answer

First-In-First-Out assumes the oldest stock is sold first, so closing inventory is valued at the most recent purchase costs.
Buy 10@2 then 10@3, sell 12 -> COGS = 10@2 + 2@3; closing 8@3
Real-world example Common for perishable goods where oldest stock genuinely sells first.
All 5 Inventory Valuation (FIFO/LIFO/AVCO) questions