What is the appropriate method for my business to value inventory?

47 August 6, 2021

There are 3 inventory methods that you can adopt:

  1. FIFO (First in first out) – This is where older items are used (sold) first. This is ideal if your inventory consists of perishable goods.
  2. LIFO (Last in last out) – This is where newer items are used (sold) first. This is ideal for non-perishable goods and provides a better measure of current earnings.
  3. WAC (Weighted average cost method) – With WAC you divide the cost of goods available for sale by units available for sale. It’s easier to calculate inventory costs when there is a high volume of goods and tracking individual costs will be difficult and time consuming.