Inventory valuation methods
First in, first out (FIFO)
The oldest units leave first, so stock left is valued at your latest purchase prices.
Weighted average (periodic)
One average for the period: (opening cost + purchases) ÷ all units available, applied to units sold and left.
Moving average (perpetual)
A new average after every purchase; each sale leaves at the average just before it.
The calculator’s example
Opening 100 units at 10, buy 200 at 12, sell 150, buy 100 at 13, sell 120.
| Method | Inventory value (130 units) | Cost of goods sold |
|---|---|---|
| FIFO | 1,660.00 | 3,040.00 |
| Weighted average | 1,527.50 | 3,172.50 |
| Moving average | 1,560.00 | 3,140.00 |
FAQ
How do I calculate inventory value?
Multiply each item’s quantity by its unit cost and add them up. If you bought the same item at different prices, use “Item movements” to pick FIFO or weighted average.
FIFO or weighted average?
Both are allowed under IFRS (IAS 2); use one consistently. LIFO is not allowed under IFRS, so it isn’t included.
Why does cost of goods sold differ between methods?
Each method charges sales at different purchase prices. When prices rise, FIFO gives a lower cost of goods sold and a higher inventory value.
Do you round the average cost?
No: it is kept exact between steps and amounts are rounded to the cent only when shown. Some accounting software rounds the average, so results can differ by a few cents.