Getting Started with FIFO

FIFO (First In, First Out) calculates the cost of sales where goods acquired first by a company are considered the first to be sold. This approach reflects the cost of older stock , with remaining stock valued at more recent costs.

FIFO costs are calculated at the point of sales order entry.

Example of FIFO Costing Method

You purchase 10 units of a product at £12 each.

Later, you purchase an additional 8 units at £14 each.

This gives a quantity of 18 units in stock.

You sell 6. The cost price is calculated as 6 units × £12 = £72.

You sell the remaining 12. The cost for these is calculated by applying the earliest cost first: (4 units × £12) + (8 units × £14) = £48 + £112 = £160.

Setting Up FIFO

1. Select the option Maintain FIFO records (in Company Set-up > Settings > Yes / No Options > Accounting). The system will automatically create FIFO opening balances based on current stock quantities. These balances are marked with a new FIFO transaction type and can be viewed on the Stock Card
   Maintain FIFO Records
   
   1. From the Set-up menu, click Company.
   2. Click Settings > Yes/No Options > Accounting.
   3. Tick Maintain FIFO records, then click Confirm.
   4. A message advising that FIFO opening balances will be created is displayed. Click Yes to continue.

      

      On each product that has stock, an opening balance is created based on the quantity the Last cost.

2. Create a FIFO costing method.
   1. From the Set-up menu, click Company. The Company Set-up window opens.
   2. Click Settings, then Costings.
   3. Within the grid, click where indicated to add a new row, or click the green tick at the bottom of the grid.
   4. In the Name box, type a name for your costing method, for instance, FIFO.
   5. In the Costing list, click FIFO.
   6. Click the green tick at the foot of the grid to confirm.
3. Set the costing method for: 
   the company
   1. From the Set-up menu, click Company. The Company Set-up window opens.
   2. Click Settings, then Costings.
   3. From the Default SOR Costing list, click FIFO.
   
   the catalogue
   1. From the Set-up menu, click Catalogues. The catalogues grid is displayed.
   2. Click the distribution filter tab which contains the catalogue you want to modify. Newly imported catalogues will be in the (Under - Test) tab.
   3. Right-click the catalogue name and, from the context menu, click Modify. The Catalogue window opens.
   4. In the Sales costing list, click FIFO.
   5. Click OK.
   , and/or
   the product
   1. On the Stock menu, click Products, or press F8.
   2. Browse to the product for which you want to set a specific costing method.
   3. Under Options and Settings, in the Sales costing list, click FIFO.
   4. Click Confirm.

Product, overrides catalogue, overrides company. You will always want to set a company costing method. Use the other costing settings for specific costing situations.

Using FIFO

For all costing methods, the cost for each detail line is used to calculate the cost of sales, and therefore profit.

 

On the Stock Card, on the FIFO tab, a list of FIFO transactions is shown.

You can Verify if the transactions match the Current stock. If there are issues, an adjustment can be made, either increasing the FIFO quantity by adding (using the Last cost), or decreasing existing FIFO records.

 

See Also