FIFO
In Arabic الوارد أولاً صادر أولاً (FIFO)
First in, first out: a costing method that charges each sale at the cost of the oldest units still in stock.
In plain words
Under FIFO, stock is held in layers, one per receipt, each at its own purchase cost. A sale uses up the oldest layer first, then the next. What remains on the shelf is valued at the most recent prices.
When prices are rising, FIFO gives a lower cost of goods sold and a higher stock value than an average would. When prices fall, the reverse holds. Neither is wrong; what matters is choosing one and applying it consistently.
A common confusion is between FIFO as a costing method and FIFO as a picking rule. The books can follow FIFO while the warehouse picks by expiry.
- Oldest layer
- 100 pcs at SAR 10.00
- Next layer
- 50 pcs at SAR 12.00
- Sold
- 120 pcs
- Left in stock
- 30 pcs at SAR 12.00
- Cost of goods sold
- SAR 1,240
In Axon Suite
How Axon Suite handles it
FIFO is one of five costing methods an item can carry in Axon Suite. An issue takes the oldest cost layers first, and voiding the document reopens the layers it used.
Feature
Five costing methods per 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.
Open: Five costing methods per item