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How to Calculate FIFO Inventory

As we already told FIFO is most popular formula for calculating issue of material for production or sale and closing stock. It is very simple formula in which we apply first purchased price for issuing the material for production or sale. But there are many doubts in the minds of students for calculating it which we try to remove first.

1st doubt # Not to Clear the Concept

Student often says, "I didn't understand it at all when my professor tried to teach it."

Try to take a simple example in which you did bought the material at $ 10 dollar and next time purchase @ 12 dollar and then you bought same material @ $ 15. Now price is not same and sometime material sold's some quantity from Ist lot and other is second lot and without calculating cost of goods sold, you can not calculate gross profit, so it is very important, you must think that all material which we bought at $ 10, we will sell it first and then we calculate the cost of goods sold with @ $ 12 and so on.

2nd doubt # My teacher did not solve the Question

There are lots of youtube video. Just search youtube box which is world's second top search engine after google and you will lots of professor will teaching practical question relating to FIFO inventory problems.

















One of them is here, I am taking as example :

In this video Prof. Matt from USA is teaching FIFO with taking very good example and almost all the students who had watched it, satisfied from his teaching. His way of teaching is simple and excellent.




Steps to Calculate FIFO cost of goods sold

1st Step : Calculate the purchase price date wise so that the most recent inventory purchases are at the top of the list.

2nd Step : Calculate the quantity of material sold from inventory.

Calculate Sale price on FIFO Basis = Sale Quantity X Cost Price of material which we bought oldest.

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Accounting Education: How to Calculate FIFO Inventory
How to Calculate FIFO Inventory
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Accounting Education
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