Inventory Valuation Method: FIFO

Before setting up your Rackbeat account, you need to clarify which inventory valuation method you want to calculate your financial inventory value based on: Average Cost or FIFO (First In, First Out).

Before you start keeping track of all your inventory movements in terms of purchases and sales, you need clarification on which inventory valuation method you want to work with. The inventory valuation method determines how your cost prices and the financial inventory value on your shelf are calculated. You can choose either the “average cost” or “FIFO” inventory principle when selecting Rackbeat’s premium subscription.

FIFO Is Based on the Idea That the Items Purchased First Are Also Sold First

With the average cost, your financial inventory value is calculated based on the average price of the goods you have purchased. If, on the other hand, you choose “FIFO” (First In, First Out), your financial inventory value is calculated based on the principle that the first purchased products are also sold first. It is recommended that you consult with an accounting professional before setting up your Rackbeat account. You need to choose an inventory valuation method when your Rackbeat agreement is installed, and you cannot change the selected inventory valuation method after setup.

If you want to use the FIFO inventory principle, you need to purchase our premium subscription. You can always have a discussion with one of our product specialists here if you want more information about the two inventory principles.