About the FIFO Costing Method

FIFO (First In, First Out) is a cost method that always issues items from 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. A stack of multiple unit costs and quantities (in order by date and time) is maintained for each item location inventory account.

A stack of receipts is maintained to stock for each item and quantities are consumed in the stack when an item is issued from stock. This consumption moves 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.

This stack is added to and subtracted from as follows:

  • When you receive a quantity into stock from a purchase receiving transaction, or job completion, a new quantity and cost is added to the bottom of the stack. Both the date and time of the transaction are recorded (for tie-breaking).
  • When you issue a quantity to a job, or ship a quantity to a customer, the earliest costs are used and the stack is reduced 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.