Accounting and Financial Management: FIFO and LIFO Analysis

This assignment solution focuses on two key inventory valuation methods: FIFO (First-In, First-Out) and LIFO (Last-In, First-Out). The solution demonstrates the application of these methods to calculate the cost of goods sold and closing inventory. The FIFO method assumes that the oldest inventory items are sold first, while LIFO assumes the newest items are sold first. The solution provides a step-by-step calculation for each method, including the impact on inventory valuation and profit. The assignment includes a table detailing the calculations and references supporting the methods. The assignment uses the given data to calculate the cost of goods sold and closing inventory using both methods. The document provides a clear and concise explanation of each method, along with the corresponding calculations and the final values for both methods.

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Accounting and financial management

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Table of Contents
Question 4..................................................................................................................................3
Question 5..................................................................................................................................3
References..................................................................................................................................4

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Question 4
FIFO method: This is the approach in which the valuation of inventory will be made
possible. There will be consideration of first in first out rule. In this, the units which are
purchased firstly will be considered to be sold first (Nisha, 2015). This will be considered to
be used and with the help of that, there will be ascertainment of the cost of goods sold and the
value of closing inventory. The calculation will be made in this respect and is shown below:
Date Particulars Units Rat
e
Amount Closing inventory
01-01-2019 Opening
inventory
100 3 300 300
19-01-2019 Sale -100 3 -300 0
20-01-2019 Purchase 500 4 2000 2000
Sale -500 4 -2000 0
25-07-2019 Purchase 100 5 500 500
Sale -50 5 -250 250
20-10-2019 Purchase 300 6 1800 2050
Closing stock 350 2050
Cost of goods sold 2550
Question 5
LIFO method: In this method, there will be consideration of the purchase which is
made in the last for the sale at the most priority. This is the method of the last in first out in
which the sale will be made firstly with the last purchased orders (Carpenter et al., 2012).
This will be calculated with the help of this as follows:
Date Particulars Units Rat
e
Amount Closing inventory
01-01-
2019
Opening inventory 100 3 300 300
20-01-
2019
Purchase 500 4 2000 2300
25-07-
2019
Purchase 100 5 500 2800
20-10-
2019
Purchase 300 6 1800 4600
Cost of goods sold 650 3300
Closing inventory 350 1300

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