accounting slide share

2. FOUR INVENTORY COSTING METHOD
The four main inventory valuation methods are
• FIFO or First-In, First-Out;
• LIFO or Last-In, First-Out;
• Specific Identification method(SIM)
• Average inventory costing method

3. FIFO
FIFO (“First-In, First-Out”) assumes that the oldest products in a company's
inventory have been sold first and goes by those production costs.This makes
bookkeeping easier with less chance of mistakes.
• The most popular inventory accounting method is FIFO because it typically
provides the most accurate view of costs and profitability.

4. HISTORY OF FIFO
For FIFOs of non-trivial size, a dual-port SRAM is usually used, where one port is
dedicated to writing and the other to reading. The first known FIFO implemented in
electronics was by Peter Alfke in 1969 at Fairchild Semiconductor

5. LIFO:
The LIFO (“Last-In, First-Out”) method assumes that the most recent products in a
company's inventory have been sold first and uses those costs instead.
Why Lifo method is used?
During times of rising prices, companies may find it beneficial to use LIFO cost
accounting over FIFO. Under LIFO, firms can save on taxes as well as better match
their revenue to their latest costs when prices are rising.

6. HISTORY OF LIFO
Since its approval by congress in 1939, the last-in-last-out (LIFO) inventory cost flow
assumption has historically been utilized by a significant portion of U.S. companies
for both tax and financial reporting purposes.

7. SPECIFIC IDENTIFICATION METHOD(SIM)
Specific identification is a method of finding out ending inventory
cost. It requires a detailed physical count, so that the company knows
exactly how many of each good bought on specific dates comprise
the year-end inventory.

8. WHAT IS SPECIFIC IDENTIFICATION METHOD IS
USED?
The specific identification inventory valuation method is used to track each
purchase and its price individually. When used for inventory management, it
provides more useful information on sales. When used for tracking investments, it
can reduce capital gains taxes due.

9. ADVANTAGES AND DISADVANTAGES:
The main advantage of using specific identification method is that the flow of cost
corresponds to the physical flow of inventory. In other words, actual costs are
matched against revenues collected. The main disadvantage of using this method is
that the net income can be easily manipulated under this method.

10. WHAT IS THE AVERAGE COST METHOD?
The average cost method assigns a cost to inventory items based on the total cost
of goods purchased or produced in a period divided by the total number of items
purchased or produced. The average cost method is also known as the weighted-
average method.

11. WHAT IS THE PURPOSE OF AAVERAGE COST?
The average cost method assigns a cost to inventory items based on the total cost
of goods purchased or produced in a period divided by the total number of items
purchased or produced. The average cost method is also known as the weighted-
average method.