PAS 2
FIFO – “First In, First Out”
means:
The first inventory is in the front and the newest inventory is in the back.
The oldest inventory items are recorded as sold first.
The goods first added to inventory are assumed to be the first goods removed from inventory
for sale.
How to calculate COGS and Ending inventory using FIFO Method
Formula: (Inventory Calculation)
Beginning Inventory x
Additional goods x
Cost of Goods Available for sale x
Less: Cost of Goods Sold (x)
Ending Inventory x
When you make a sale using the FIFO method you make the assumption that your oldest inventory is
going to be sold first. Your oldest inventory is what you bought first so you are going to imagine that you
sell it first every time.
But how do you do it?
For example, you are a seller of oranges.
Transactions:
It is the beginning of November and you have 220 oranges in your inventory, and you bought these for 2
pesos each.
On November 5th you buy another 400 oranges for Php 1,200 and on November 12th you sell 500
oranges for Php 2,750.
