FIFO/LIFO and Moving Average calculation difference

Valuation Rate of an item is calculated based on the total expense incurred to make the product available for sale like freight, labour, cost of raw materials, etc.

When you receive and sell inventory, the Valuation Rate determines how much cost you recognize. In the CGIC App you can choose one of three methods under Stock Settings on each Item:

• FIFO (First-In, First-Out)
• LIFO (Last-In, First-Out)
• Moving Average

Consider these transactions:

Date	Transaction	Qty	Unit Cost
2020-04-01	Purchase	10	100
2020-04-06	Purchase	10	120
2020-04-10	Sale	15	?

1.0 FIFO

With FIFO, you consume oldest stock first:

• Take 10 @ 100 and 5 @ 120
• Consumed Value = (10×100) + (5×120) = 1,600
• Remaining 5 @ 120 → Balance Value = 600

1.1 LIFO

With LIFO, you consume newest stock first:

• Take 10 @ 120 and 5 @ 100
• Consumed Value = (10×120) + (5×100) = 1,700
• Remaining 5 @ 100 → Balance Value = 500

1.2 Moving Average

With Moving Average, you recalculate the average cost on each receipt:

• New average = ((10×100) + (10×120)) ÷ 20 = 110
• Sale of 15 × 110 = 1,650 → Consumed Value = 1,650
• Remaining 5 × 110 → Balance Value = 550

Method	Consumed Value	Balance Value	Total Value
FIFO	1,600	600	2,200
LIFO	1,700	500	2,200
Moving Average	1,650	550	2,200

Each method impacts your Cost of Goods Sold and inventory valuation differently—choose the one that best aligns with your financial strategy and inventory flow.