Correct determination of the cost of products manufactured by an enterprise is one of the tasks of the departments conducting accounting and tax accounting. The organization's expenses, which represent an assessment of the cost of all material resources used in the production of products, are grouped according to certain characteristics and then summed up in a certain sequence.
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The rules of this grouping are reflected in the accounting policies of the enterprise and are unchanged, at least during the entire reporting year. The complexity of accounting for determining the cost of purchasing inventory (hereinafter referred to as inventory items) increases with the increasing complexity of each individual production.
What it is?
LIFO and FIFO are methods that allow you to obtain the financial result of the activities of any enterprise, based on different approaches to the cost of inventory and materials. However, the choice of approach is limited by law.
Concept
The process of writing off material assets for production and determining the actual cost of materials is carried out using the following methods:
- at average cost;
- FIFO method - at the cost of the very first purchases;
- LIFO method - at the cost of the most recent purchases;
- at the cost of each unit.
It must be borne in mind that an enterprise has the right in its accounting policy to determine the valuation method for all used inventory items at once, but it is allowed to define different methods for different groups of material assets.
Decoding
Decoding is the basis for determining the disposal method.
Last in First out
LIFO method - LIFO (Last in First out) stands for “Last in, first out.” The bottom line is that when writing off inventories, the costs of the latest acquisitions are initially taken into account.
First in First out
FIFO method - FIFO (First in First out) means “first in, first out”. Theoretically, it is assumed that the materials that arrive first in time will be used first.
Differences and comparative characteristics of assessment methods
FIFO and LIFO differ from each other in several ways.
And these differences are as follows:
- FIFO is an official accounting method for assessing the cost of TIC, while LIFO was officially abolished in 2008. If we talk about tax accounting, FIFO is also still used, and the second method was canceled in 2015.
- With FIFO, the cost is assessed strictly at the cost of the first purchased lot, and with LIFO - the last one.
- With the FIFO method, there is a risk of making errors during calculations, which is associated with the impact of inflation on the cost, and in the case of LIFO, such a miscalculation is minimal.
Advantages and disadvantages
The FIFO method has the following qualities:
The LIFO method has the following features:
Application in accounting
The presence of raw material reserves at the company is the main condition for the production of the enterprise and other economic entities to not stop.
For accounting purposes, it is possible to use different methods for determining cost.
Features of the LIFO method
Valuation of inventory items based on the LIFO method means that no matter in what order and at what price inventory items are purchased, they will be written off for sale or production in the reverse order of receipt.
Regardless of the order in which the batches of goods and materials are received, the last batch received at the last price will always be written off.
This method is most suitable for materials that do not have an expiration date and do not lose their properties and qualities over time.
The main feature of the LIFO method is that it allows you to take into account the effects of inflation in the cost of production.
Its current level has already been taken into account in the cost of the last batch of goods and materials, which is written off to production at a price taking into account the inflation component.
This approach allows us to keep the cost of products in accordance with the economic situation in the country and maintain competitive prices for our products in relation to competing manufacturers.
Important! Currently, the LIFO method has been abolished by law.
Example of a task with postings
The organization takes into account the cost of materials at purchase prices. The write-off is carried out using the LIFO method. As an example, we will choose electrodes that the company purchases in packs (packages). Initially, there were 100 packs in the warehouse at the same price of 60,000 rubles per pack, for a total of 6,000,000 rubles.
- 200 packs (packages) of 80,000 rubles each, total – 16,000,000 rubles;
- 100 packs (pack) - 70,000 rubles per pack, total - 7,000,000 rubles.
Within a month, 200 packs of electrodes were released from the warehouse.
At the same time, 100 packs of 70,000 rubles each with a total cost of 7,000,000 rubles and 100 packs (packages) of 80,000 rubles each for a total cost of 8,000,000 rubles were written off for production.
Let's calculate the cost of decommissioned electrodes:
- 100 p. (u.) * 70,000 rub. + 80,000 rub. * 100 p. (u.) = 15,000,000 rub.
- Cost of one pack: 15,000,000 rubles. / 200 p. = 75,000 rub./p.
The accounting department will post the following:
Dt invoice 20 Cr. accounts 10 – 15,000,000 rub. – write-off of materials (electrodes) for production.
Features of the FIFO method
FIFO, as a method, is based on the fact that, regardless of the sequence of receipt of inventory items at the warehouse, the very first batch of valuables will be written off.
This approach is simply irreplaceable if the used goods and materials have an expiration date and their quality is lost over time.
According to the FIFO method, each group of received materials is considered separately, without taking into account all previous receipts.
The very first batch of materials is written off for production; if this quantity is not enough, then the missing materials are written off from the next batch, and so on.
Which inventory items are applied to?
Currently, the concept of “shelf life” is very relevant for many groups of inventory materials, for example, in the production of meat or dairy products.
The production of complex household appliances also poses this problem. New models of televisions, refrigerators and other equipment must be immediately sold in order to get ahead of your competitors and be the first to market your products. This will allow you to get maximum profit.
Therefore, no matter what price subsequent lots are purchased at, they will be assessed not at the actual cost, but at the price of the very first batch.
This approach is economically justified when it is necessary to conduct an accurate analysis of the return on investment in inventory and materials and realistically estimate costs.
But this approach also has its drawbacks:
- the real impact of inflation on the cost of everything that the enterprise specializes in is not taken into account;
- there is no way to take into account price fluctuations between different batches of goods and materials, which may be purchased at different times and from different suppliers.
Average cost estimate
The most convenient method is defined as write-off at average cost.
The essence of this approach is that during the reporting month, inventory items are written off at book prices.
They are not taken as the actual cost of goods and materials, but as an abstract cost obtained by calculation, for example, the planned price or the average price for previous periods (quarter, year).
The average cost per unit of inventory and materials at the end of the period under review for groups of material assets separately is determined as the ratio of their entire cost (the entire amount of inventory and materials at the beginning of the period and the amount of inventory and materials purchased during the reporting period) to the number of these materials (the number remaining at the beginning of the period and purchased during the reporting period ).
The cost of written-off inventory items is found by multiplying the number of valuables by the average calculated cost.
In turn, the cost of the number of remaining inventory items at the end of the period is found by multiplying their remaining quantity by the average estimated cost of these values.
Example of a task with postings
Let's use the same initial conditions that were considered in the example of accounting using the LIFO method.
According to the chosen method, it does not matter which batch the electrodes will be written off from.
Let's calculate their average cost at the end of the reporting period:
100 p. * 60,000 rub. + 200 p. * 80,000 rub. + 100 p. * 80,000 rub. = 30,000,000 rub.
We determine the average cost of one pack of electrodes in the reporting period:
30,000,000 rub. / 400 p. = 75,000 rub./p.
Let's calculate the cost of scrapped electrodes:
200 p. * 75,000 rub. = 15,000,000 rub.
The accountant will make the following entries:
Dt sch. 20 Cr. 10 – 15,000,000 rub. – write-off of materials (electrodes) for production.
Which one is cancelled?
For quite a long time, valuation methods in accounting differed from tax accounting. LIFO has been eliminated for accounting purposes. The resolution introduced a number of changes to certain regulatory legal acts on accounting.
From this point on, only when calculating taxes did the FIFO method continue to be used. As of January 1, 2015, the situation was corrected, and the LIFO method was also abolished in tax accounting.
The main reasons for this decision:
- In Western European countries, the LIFO method is not used, so this decision of the Russian government was caused by the desire to bring the world accounting system closer to the Russian accounting system.
- Calculations have shown that, in conditions of constantly growing inflation, this method has a negative impact on production and reduces the profitability of business entities. In practice, the benefit of this method is obvious only when prices for goods and materials are constantly falling. But practically nowhere in the world is there a process of reducing the cost of resources.
Application in warehouse logistics
As almost all businesses grow, they use a variety of storage facilities. Although they themselves are a source of costs, without convenient warehouses the costs of maintaining, storing and quickly delivering goods and materials to the right place increase sharply.
They increase overall costs and reduce the profitability of any enterprise that uses a large range of goods and materials in its activities.
The rapid growth of competition in the warehouse services market leads to increased requirements for warehouse logistics, improvement of logistics processes and reduction of administration costs. To achieve this, warehouses use different picking principles.
The LIFO picking method is based on the principles in which stored materials (loads) can be both added and removed from only one end - the top.
As an example, consider a stack of books: to take the second book, you must first remove the one on top, and to take the lowest book, you must first remove all the top ones.
This method is used if the quantity of cargo is limited and access to them must be organized in a certain order.
The LIFO principle is used in cases where the last materials delivered must be the first to be shipped.
Picking according to the FIFO method occurs according to the principle: the first to be loaded into the warehouse is the first to be shipped from the warehouse. All other cargo arriving later are awaiting their turn.
It must be borne in mind that cargo picking methods are not used in their pure form in warehouse activities. A combination of different methods is always chosen for different groups of cargo.
To organize calculations of the effectiveness of application of methods, special software is used.
Attention!
- Due to frequent changes in legislation, information sometimes becomes outdated faster than we can update it on the website.
- All cases are very individual and depend on many factors. Basic information does not guarantee a solution to your specific problems.
Over the thousand-year history of trade, many methods of accounting for goods have been developed and tested. One of them is the “lifo” method. The scope of its application is not limited only to accounting; this concept is widely used in warehouse logistics and maritime cargo transportation.
The essence of the “lifo” method in different fields of activity
The whole essence of the method is reflected in its name: LIFO is an abbreviation of the English phrase “last in, first out”, i.e. “last to come, first to leave.”Let's imagine a warehouse into which homogeneous goods arrive in a continuous flow and, at the same time, shipments from the warehouse take place. The cost of each batch of goods received is different, as is the number of units in the batch. And during shipment, an additional condition arises: a previously received batch may not be shipped in full, or goods from different batches, respectively, with different values, may be included in one shipment. How, in this case, to determine the cost of the shipped batch? After all, manually marking and counting how many units from which batch and at what purchase price were included in the shipment is too labor-intensive and impractical. If you apply the “lifo” method in this situation, then there is no need for such detail. Regardless of which batch the goods were actually shipped from, when accounting it will be considered that goods from the most recent batch are released first.
In warehouse logistics, the “lifo” method also involves priority shipment of the last-arrived goods. In the field of maritime cargo transportation, this method implies that the cost of transportation includes loading, freight of the vessel, but does not include the cost of unloading at the port of arrival.
In banking, this method accrues interest on the deposit when the client withdraws part of the deposit.
When assessing the value of securities being sold using the “lifo” method, the sales price is considered equivalent to the value of the most recently acquired assets.
An example of calculating cost using the “lifo” method
Let's consider this method using the example of a warehouse:There is a carryover balance of 8 items in the warehouse. for the amount of 700 rubles. The price per unit, respectively, is 700/8 = 87.5 rubles/piece. Several batches of goods were received on different dates per month.
- batch No. 1 20 pcs. at a price of 90 rubles/piece.
- batch No. 2 15 pcs. at a price of 92 rubles/piece.
- batch No. 3 35 pcs. at a price of 87 rub./piece.
73 units were released at the end of the month. one batch.
The cost of goods sold using the “lifo” method will be calculated as follows:
- Batch No. 3, the last one to arrive, will be completely gone - 35 pcs.
- Batch No. 2, which arrived earlier - 15 pieces, will be completely gone.
- Batch No. 1, which arrived first - 20 pcs. will be completely gone.
The cost of the shipped batch will be:
(35*87) + (15*92) + (20*90) + (3*87.5) = 3,045+1,380+1,800+262.5 = 6,487.5 rubles. for 73 pcs.
The price per unit will be: 6,487.5/73 = 88.9 rubles/piece. The cost per unit of warehouse balance remained unchanged - 87.5 rubles/piece.
The main advantage of the “lifo” method is the ability to make a profit in an inflationary environment and reduce the tax base for income tax. For this reason, the use of this method in accounting and tax accounting is currently prohibited.
Today, there are many different accounting methods, each of which has its own specialization, advantages and disadvantages.
Recently, methods such as FIFO and LIFO have become widespread, which can be used in different situations, and at the same time significantly simplify reporting in certain areas.
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You need to correctly understand which inventory items these methods can be used for and what their key features are.
Definition of terms
Such a difference ultimately directly affects the calculation of taxable profit, and at the same time it can also be used to minimize it.
Methods for estimating reserves
Today, there are several common methods by which the cost of transferred material assets is estimated:
- maintaining reports on the cost of each individual unit;
- according to the weighted average cost of production;
- at the cost of those types of property that were received first in time;
- at the cost of those types of property that were received most recently.
In the vast majority of cases, the procedure for writing off inventories in each individual case is determined differently and directly depends on the internal policy of the company, and different types of property can be written off using different methods. It is worth noting that for the same nomenclature the method always remains the same.
Today, in practice, it is the first methods that are most often used, since FIFO and LIFO raise a fairly large number of questions, although not taking them into account would be a serious omission, since, for example, using the same FIFO method will significantly increase the image of the organization in in the eyes of its potential partners or investors.
Application of FIFO and LIFO methods in accounting
If the property does not have any restrictions on shelf life, then in this case there is no significant difference in how the goods will be released, and therefore the choice of certain methods relates only to accounting and bookkeeping, and management has the right independently choose which option you consider more optimal.
By using the FIFO method, it is possible to simplify control over the promotion of certain units of production, while LIFO is usually used only if there are appropriate grounds due to external factors.
As an example of the relevance of these methods, it is customary to cite the situation with plates stacked. All goods belong to the same category and are practically not subject to wear, and therefore it is best to sell or use for other needs the top one, that is, the one that was received last.
First in First out
Translated into Russian, this scheme looks like “first in, first out,” that is, an assessment of retired products is carried out, based on the assumption that initially those types of property that were delivered to the arrival before others are initially provided for production or other purposes. In other words, goods must be released in the same sequence in which they were transferred to the organization’s warehouse.
Each received batch must be displayed in the prepared reporting as a separate independent group if the FIFO method will be used in the future, and this condition is mandatory even if the goods of this item were received at the warehouse earlier.
Which goods and materials apply to
The work of any company is simply impossible without the acquisition of any assets that will then be used in sales and production processes, and the group of this property is called “inventories.”
In this case, reserves mean a certain amount of valuables that can later be used in the form of specialized materials or resources in various processes of production and further resale of commercial products, and in particular, this applies to:
- raw materials and supplies;
- finished products in warehouse;
- unfinished products;
- goods purchased for subsequent sale;
- shipped products;
- expenses that are written off for future periods;
- livestock and other farmed and fattening animals;
- other similar costs or supplies.
Such inventories will be written off from the warehouse every month, used in the process of production or sale of any commodity product, and specialized methods are used to maintain records of such business transactions, one of which is FIFO.
Peculiarities
In accordance with the rules of this method, the accountant must take for granted that inventories are not used up at one time, but through gradual write-offs, and at the same time they are removed from the warehouse at different points in time. Along with the posting that describes the procedure for transferring material assets, the initial cost of this property should also be written off.
The FIFO accounting method provides for the write-off, first of all, of the oldest supplies, and at the actual cost of production of the first receipt. It is worth noting that not all companies comply with the first condition, that is, the most important criterion is the use of the cost of the initial batch, but in fact, materials received in any receipt can be written off. Accordingly, in the process of writing off the second and subsequent batches, their cost will be determined in accordance with the price of a similar supply.
The FIFO method has a direct connection with the adjustment of market value, and with rising inflation, the use of this method can lead to a significant increase in the amount of income tax, but if the value of inventories decreases, on the contrary, there will be a guaranteed reduction in the income rate.
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Example of estimating average cost
The company is engaged in capitalizing commodity products at the cost of the supplier, while writing them off from the warehouse using the FIFO method.
By the beginning of the reporting period, there were 100 boxes of nails in the enterprise’s warehouse, the cost of each of which is 100 rubles, that is, the total material assets are worth 10,000 rubles.
Over the course of a month, two new batches arrive at the warehouse, the first containing 200 boxes for 150 rubles each, and the second – 150 boxes for 200 rubles each, and during the same period of time, 200 boxes of nails had to be removed from the warehouse for production purposes.
In accordance with the current rules, a technique is used in which 100 boxes are consumed at a cost of 100 rubles (for a total amount of 10,000 rubles), while the remaining 100 are already written off at a cost of 150 rubles (for a total amount of 15,000 rubles), and at the end of the month there remains 100 boxes for 150 rubles (for 15,000 rubles) and another 150 boxes for 200 rubles (for 30,000 rubles).
Last in First out
LIFO is a technique in which inventory accounting is carried out in value terms in accordance with the price of the batch that was received or produced last, and those values that were accepted for accounting last must be removed from it first.
By using this method, it is possible to exclude the possibility of reducing the estimated cost of production due to inflation, which allows, even in the event of rising prices, to reflect minimum profit indicators in the reporting, since the cost of inventories will be written off downward.
Cancellation in tax accounting
To date, the use of the LIFO method is not provided for by current legislation and is not included in the accounting rules. It is worth noting the fact that new legislative norms were also introduced separately, according to which, since January 2019, the total number of valuation methods is compared with the number of provided valuation methods that can be used in accounting, and the reason for this is precisely the abolition of the method LIFO.
Corresponding amendments were made to paragraph 8 of Article 254 of the Tax Code, as well as to subparagraph 3 of paragraph 1 of Article 268 of the Tax Code, in connection with which today tax and accounting only provides for the use of the remaining three methods: FIFO, at the cost of each unit or at average commodity value.
When not applicable
Now, in the process of determining the amount of material costs in the process of writing off any raw materials or materials used during the manufacture of goods, in accordance with the accounting policy of the company for tax purposes, one of the above methods of assessing the materials and raw materials received must be used. In addition, in the process of selling purchased commodity products, only these methods are also used for the cost of these goods, which is determined in accordance with the accounting policy.
In the process of selling property rights or any property, the taxpayer has the right to reduce the profit from such operations by the amount of expenses that are directly related to the storage, evaluation, maintenance and transportation of the property being sold.
In the case of the sale of securities, the price at which these securities were purchased is recognized as an expense, calculated in accordance with the method of accounting for securities that was established by the taxpayer - at the cost of each unit or according to FIFO.
If the cost of selling municipal and government securities that are in circulation on the organized market is added to a certain portion of the accumulated coupon income, the amount of profit and expense will be calculated excluding the accumulated coupon income.
Profit from the acquisition of securities in the event of their sale should be taken into account separately in relation to those securities that are and are not in circulation on the organized market. Thus, the use of the LIFO method is not envisaged in a sufficiently large number of cases.
Comparative characteristics
The FIFO method is characterized by extremely high calculation speed and ease of use in accounting, due to which it is often used by those organizations in which production processes are used sequentially, that is, they relate to the manufacture or use of perishable materials. In addition, the advantage is also the increase in the creditworthiness of the company, as well as the ability to attract even more investments or creditors.
The disadvantage of FIFO is that in the case of uneven use of material reserves, inflation is not taken into account, as a result of which the cost of incoming products increases by the percentage of inflation and, accordingly, the financial result is overstated, and further tax costs are expanded.
The LIFO method provides an opportunity to reduce tax liabilities if there are not so many inventories used, and also if the volume of purchased inventories is an order of magnitude greater than those written off.
Reducing tax costs ultimately results in increased cash flow for a company, which significantly increases its financial strength and also frees up new reserves to increase its overall assessed value. It is also worth noting that in the process of calculating the replacement cost of inventories, using this method allows you to better estimate the total amount of economic profit.
FIFO is a method of accounting for the cost of inventory, in which those batches that were received in the first deliveries are first written off. The name comes from the English expression “first in, first out,” which literally translates as “first in, first out.” This is one of the most frequently used methods by accountants around the world, which is what the article will be devoted to.
general characteristics
FIFO is an accounting method that is often equated to the natural flow of priority. This can easily be explained by the fact that write-offs are carried out strictly within the accepted chronological framework. First of all, the initial batch of inventory items is released for production or sale, at the second stage - the subsequent one, etc. Accounting ends at the moment when the last delivery is released from the warehouse.
What property is the FIFO method applicable to?
The activity of an enterprise is impossible without the purchase of assets involved in the production and sales cycle. A group of such property is called the organization's inventories. Inventories are assets that can be used in the form of materials or resources for the manufacture of products or further resale. These include:
- materials and raw materials;
- work in progress items;
- finished products in warehouse;
- goods purchased for sale;
- shipped goods;
- expenses written off for future periods;
- farmed and fattening livestock;
- other supplies and expenses of a similar nature.
Inventories are written off from the warehouse on a monthly basis and sent for sale or production. To account for such a business transaction, one of the methods is used, including the FIFO method. The procedure for registering the receipt and release of inventories is regulated by the accounting policy.
Peculiarities
FIFO is a method that implies that the accountant takes for granted that inventories are not spent in an instant, but are written off gradually. Inventory leaves the warehouse at different intervals. Simultaneously with the posting describing the transfer of material assets, the cost of the property must be written off. At what price should an accountant record retiring inventory?
The FIFO accounting method implies that the oldest supplies need to be written off first at the actual cost of the first receipt. At the same time, not all enterprises follow the first part of the condition, i.e. the main criterion is still the use of the prices of the initial batch for the first release into production/sales. In fact, materials from any parish can be written off. For disposal of the second and further batches, the cost is determined at the prices of the second, third, and so on in order of delivery.
The FIFO method is directly related to changes in market prices. With rising inflation, the use of the method threatens to increase the amount of income tax. In the opposite situation, if the value of inventories decreases, the rate of liabilities on income is guaranteed to decrease.
Areas of use
Calculating the cost of inventories according to FIFO, which is based only on a chronological framework, allows you to successfully use the method for accounting in enterprises of various industries. For example, it can be used by wholesale trading companies, industrial enterprises, and logistics organizations. The only exception is retail trade, the accounting of which requires writing off costs at the exact price of individual products. FIFO is a method that cannot provide this.
Despite the universal approach of the method to assessing inventories, not every enterprise is able to function using it. When deciding to create one or another method for calculating cost when writing off inventory, you should carefully weigh the positive and negative aspects.
FIFO write-off method: advantages
The use of this method will appeal not only to accountants, but will generally have a positive impact on the activities of the enterprise. The most advantageous and convenient qualities for maintaining warehouse accounting using FIFO are:
- simplification of collection and reflection of information and high productivity of the accountant;
- ideal compatibility taking into account perishable products;
- ensuring lower levels of stale reserves;
- increasing the economic value of the enterprise, which may be beneficial for certain categories of legal entities;
- high profit figures can attract investors and characterize the company's creditworthiness from the best side.
The FIFO valuation method has an irreplaceable practical value: simplicity of accounting organization. To fully understand this advantage, consider a hypothetical example, without numerical data:
Enterprise N receives MPZ in small batches. As they are used, the cost of each of them increases, and the reserves themselves are consumed unevenly. At the end of the month, it becomes necessary to take into account the balances from each delivery and the amount of inventory consumed. With the usual accounting methodology, the accountant will have to perform many difficult and routine operations: balances must be calculated for each batch separately, and their value only increases in the next period. FIFO is a method that allows the accountant to write off balances at the cost of the last batch from the end. This makes the calculations much simpler.
Disadvantages of the FIFO technique
No matter how universal the method may seem, it still has its negative sides, which can affect the activities of the enterprise. These include:
- ignoring inflationary processes when accounting, which leads to an overestimation of the cost of inventories;
- an increase in the amount of tax liabilities due to an increase in the size of the organization’s financial results;
- complication of the cost planning process;
- deterioration in enterprise management and forecasting of future activities.
Perhaps all of the above points boil down to the first: insufficient attention to inflation processes. Uneven consumption of inventories can lead to the write-off at a much lower price of property that originally cost many times more. The result is inflated indicators that confuse management when drawing up a further development plan.
To avoid negative consequences, first of all, you should not forget about the features of the method when analyzing the results of financial activities and planning the further development of the enterprise. Before using the FIFO method, it is advisable to carefully consider its need for an organization's accounting.
Calculation rules
FIFO is one of the methods established by PBU for accounting for inventories. To organize the correct inventory write-off process, you should adhere to the rules for its application:
- Not only incoming and expended inventories are subject to calculation, but also their balances in the warehouse;
- unused inventories are subject to accounting once at the end of the month;
- an enterprise has the right to use a simple and modified FIFO form.
The modified accounting method involves using the average cost of inventories, which is recalculated monthly, when calculating.
FIFO method: calculation example
It is best to fully understand the essence of the method in a visual way. Let's consider an example at an enterprise with a given condition: the balance of the inventories at the beginning of March 2016 was 600 USD. e. (60 units of inventory at a cost of $10). The company received 3 deliveries:
- the first was 900 USD. e. (10 units of 90 c.u.);
- second – 10,500 USD. e. (100 units at 105 c.u.);
- third – 3000 USD e. (20 units of 150 c.u.).
Write off inventories and calculate the balance at the end of the month. We will place the calculation results in a table.
According to the task data, in the reporting month there were a total of 190 units of inventories in the warehouse. As a result of business activities, 180 units were consistently written off. The calculations used prices starting from the first delivery. In total, at the end of the period, 10 units of inventory remained, which are subject to accounting at the cost of the last delivery (in this case, the third).
The FIFO method is very simple and easy to use, although it does entail some negative consequences. Nevertheless, with a competent approach to establishing the method of warehouse accounting for inventories necessary for an enterprise, it is possible to minimize negative manifestations and achieve a maximum positive impact on the development of the economic activity of the enterprise.