About the FIFO Costing Method

FIFO (First In, First Out) is a cost method which always issues items out of inventory at the oldest (or last) cost at which the item was received. The FIFO option uses the first-in, first-out cost flow method. The system maintains a stack of multiple unit costs and quantities (in order by date and time) for each item location inventory account.

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, or job completion, the system adds a new quantity and cost to the bottom of the stack. The system records both the date and time of the transaction (for tie-breaking).
When you issue a quantity to a job, or ship a quantity to a customer, the system uses the earliest costs and reduces the stack by the value of the items issued or shipped.

The Unit Cost field on the Items form shows the next cost at which to issue the item. When you use FIFO, the system posts the oldest receipt cost to the Unit Cost field on the Items form each time you process a new receipt.