Distinguishing between FIFO and identified cost
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# Distinguishing between FIFO and identified cost

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• Discuss This Topic
 BabaJide Martins F. 0 0 Which one is more preferable FIFO or identified cost?
 Alice B. 0 0 Both approaches to measure stock at hand are and valuable even though one approach seem a bit complicated while calculating.
 Morne V. 0 0 It is possible for items from different batches to be sold in the one transaction. Identification of individual stock items is made possible by electronic measuring devices such as the use of barcodes
 Sunday O. 0 0 Distinguishing between FIFO and identified cost
 Odongo M. 0 0 Accounting -> Distinguishing between FIFO and identified cost Distinguishing between FIFO and identified cost FIFO ("first in - first out") and identified cost are approaches to measuring the "cost" of stock on hand at the end of the accounting period. The problem occurs when stock is bought in batches during the period at different prices. The business must decide which stock is on hand from which batch. FIFO method - cost of units removed from inventory is assumed to be from the first units available for sale at the time of each sale. Identified cost is where the particular batch from which goods are sold is identified. This is relevant when batches of goods are bought at different prices and the identification of actual cost price is considered important. It is possible for items from different batches to be sold in the one transaction. Identification of individual stock items is made possible by electronic measuring devices such as the use of barcodes. Accounting alternatives Example: In the year ended 31 December smoke detectors are bought in batches: January 10 smoke detectors at \$15 each May 20 smoke detectors at \$17 each August 15 smoke detectors at \$18 each November 20 smoke detectors at \$20 each A stock take revealed that 25 smoke detectors are on hand at 31 December. The stock was identified as coming from the following batches: January - 3, May - 10, August - 5 and November 7. Required Calculate stock on hand for both FIFO and identified cost. FIFO = \$400 (20 x \$20) + \$90 (5 x \$18) = \$490 Identified cost = \$45 (3 x \$15) + \$170 (10 x \$17) + \$90 (5 x \$18) + \$140 (7 x \$20) = \$445 In their response students should go on to say that FIFO has exceeded the valuation of identified cost for stock by \$45. Stating the actual dollar amount is important.
 Manish K. 0 0 course is understood.
 Adil N. 0 0 What is distinguishing between FIFO and identified costs?
 Gloria N. 0 0 ok
 Epie E. 0 0 well understood.
 Owusu E. 0 0 First -in-first-out means stocks received first are the once to be issued first in that order
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