1. What is FIFO Periodic Method?

The FIFO (First-In, First-Out) periodic method assumes that the oldest inventory items are sold first. The calculation is done at the end of the accounting period (periodic) rather than after each sale (perpetual).

2. How Does FIFO Work?

The FIFO method follows this basic formula:

Key Points:

• Costs flow in chronological order
• Ending inventory consists of the most recently purchased items
• Matches current costs with current revenues

3. Importance of Inventory Valuation

Details: Proper inventory valuation affects cost of goods sold, gross profit, and taxable income. FIFO typically results in higher ending inventory values during periods of inflation.

4. Using the Calculator

Instructions: Enter beginning inventory units and value, purchases units and value, and total sales units. The calculator will determine ending inventory value using FIFO method.

5. Frequently Asked Questions (FAQ)

Q1: When should FIFO be used?
A: FIFO is appropriate when inventory items are perishable or subject to obsolescence, or when inventory costs are rising.

Q2: How does FIFO affect financial statements?
A: In inflationary periods, FIFO results in lower COGS and higher profits compared to LIFO.

Q3: What's the difference between periodic and perpetual FIFO?
A: Periodic calculates at period end, perpetual updates after each sale. This calculator uses periodic method.

Q4: Does FIFO match physical flow of goods?
A: Only if the company actually sells oldest items first. FIFO is an assumption, not necessarily reality.

Q5: How does FIFO affect taxes?
A: In inflationary periods, FIFO typically results in higher taxable income than LIFO.