About the LIFO Costing Method
LIFO (Last In, First Out) is a cost method which always issues
items out of inventory at the newest (or last) cost at which the item was received. The
system maintains a stack of receipts to stock for each item and consumes quantities in the
stack when an item is issued out of stock. This consumption is done from the newest to
oldest cost if LIFO is being used, and from the oldest to the newest if FIFO is being used.
Each receipt to stock includes unit cost details and quantities (in order by date and time)
for each Item Location Inventory account.
The system adds to and subtracts from this stack as follows:
- When you receive a quantity into stock from a purchase receiving transaction, job completion, or miscellaneous receipt, the system adds the receipt quantity and cost to the bottom of the stack.
- When you receive a quantity into stock from a customer order return, stock adjustment, cycle count posting, or material withdrawal, the system adds the quantity received to the current quantity in the last record of the LIFO file.
- When you issue a quantity to a job or ship a quantity to a customer, the system uses the latest (last-in) costs and reduces the stack by the value of the items issued/shipped.
The Unit Cost field on the Items form shows the next cost at which to issue the item. When you use LIFO, the system posts the receipt cost to the Unit Cost field on the Items form each time you process a new receipt.