{"id":31752,"date":"2017-05-17T11:00:30","date_gmt":"2017-05-17T03:00:30","guid":{"rendered":"https:\/\/zahiraccounting.com\/en-my\/?p=31752"},"modified":"2017-05-16T17:06:30","modified_gmt":"2017-05-16T09:06:30","slug":"inventory-costing-methods","status":"publish","type":"post","link":"https:\/\/zahiraccounting.com\/en-my\/31752-inventory-costing-methods.html","title":{"rendered":"Inventory Costing Methods"},"content":{"rendered":"

\"Inventory<\/a><\/p>\n

There is four inventory costing methods to set the cost of goods sold. These inventory costing methods are applied based on the situation and financial goals. Business owners should understand the difference in each of the methods and capable of selecting the best method for their system.<\/p>\n

In business, inventory covers raw material, work-in-process, and on-hand finished goods. \u00a0Since inventory is also considered an asset, the owner must apply the valid method for setting the cost of inventory in order to record it as an asset.<\/p>\n

The four inventory costing methods:<\/p>\n

    \n
  1. First In, First Out (FIFO) : It is the items bought first are sold first, means the items in stock are latest. Most companies apply this policy because it is closely matched to the actual movement of inventory. When rising prices occur, with the assumption that the first bought are the first sold, means that the cost of goods sold first is charged least expensive. The lower cost of goods sold will cause a higher amount of operating earning and more income paid.<\/li>\n
  2. Last In, First Out. The opposite of FIFO, the recent items bought are sold first, which means that the item in stock is the oldest ones.<\/li>\n
  3. Average Cost Method. Setting the inventory cost by calculating the moving average of all inventory costs. This method provides more reliable cost recognition. Companies use the weighted-average method to determine a cost for units that are basically the sam.<\/li>\n
  4. Weighted average method. Since the cost of new inventory purchases are changed into the cost of existing inventory to gain a new weighted average cost, which in turn is adjusted again as more inventory is purchased.<\/li>\n<\/ol>\n

    Each costing methods has its advantages and disadvantages. The method you are using to value the inventory and monitoring the costing can have a significant impact on your business.<\/p>\n","protected":false},"excerpt":{"rendered":"

    There is four inventory costing methods to set the cost of goods sold. These inventory costing methods are applied based […]<\/p>\n","protected":false},"author":11,"featured_media":31770,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[35],"tags":[61,60],"yoast_head":"\nInventory Costing Methods | Zahir Malaysia Blog<\/title>\n<meta name=\"description\" content=\"There is four inventory costing methods to set the COGS. 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