Content

Inventory Accounting Methods Explained With Usable Examples and Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials What Is Inventory Costing? Inventory and Cost of Goods Sold Outline Demonstrating Cost Flow Assumptions

Under the perpetual system, the first‐in, first‐out method is applied at the time of sale. The earliest purchases on hand at the time of sale are assumed to be sold. Although the cost of goods available for sale is the same under each cost flow method, each method allocates costs to ending inventory and cost of goods sold differently. Compare the values found for ending inventory and cost of goods sold under the various assumed cost flow methods in the previous examples. Income taxes may also be a consideration when choosing a cost flow formula.

Weighted average costing would [...]