Cost follows the method you chose, item by item
Each item carries one of five costing methods: weighted average, FIFO, first expiry (FEFO), standard or specific cost. Every issue is valued by that method and posted to the ledger, and voiding a document reverses it at the cost it was recorded at.
- Oldest layer
- 100 at 4.00
- Next layer
- 50 at 4.60
- Issued
- 120
- Cost of the issue
- 400.00 + 92.00 = 492.00
Goes through · Posted at 492.00; 30 remain in stock at 4.60
How cost is set and kept
Pick the method
Set it on the item. Weighted average is the default for a new item.
Receive at the agreed cost
A receipt against a purchase order takes the order line’s net price as its cost.
Issue at the method’s cost
FIFO takes the oldest layers, FEFO the soonest-expiring, average the running average, specific the lot’s own cost.
Void at the recorded cost
A voided document reverses at the cost it posted, and FIFO and FEFO reopen the layers it used.
Details that matter
Locked once stock moves
After an item has stock history, its costing method can’t change. Create a new item instead.
Standard cost with variance
A standard-cost item is valued at its standard; the difference from the purchase price posts as purchase price variance.
Every movement reaches the ledger
Receipts, issues, transfers and count adjustments each post their cost to the inventory accounts.
Questions buyers ask
Can different items use different methods?
Yes. The method is set per item, so fresh goods can run on FEFO while spare parts run on average.
Can we switch an item from average to FIFO later?
Not once it has stock history. The method is fixed so past costs stay true; create a new item for the new method.
What happens to cost when a receipt is voided?
The stock leaves at the cost it came in at, so the ledger returns to where it was.