FIFO Calculator for Inventory
Calculate Cost of Goods Sold & Ending Inventory Using FIFO Method
Step 1: Beginning Inventory
Step 2: Add Purchases
Enter all inventory purchases in chronological order (oldest first).
Step 3: Units Sold
FIFO Calculation Results
📊 FIFO Calculation Breakdown
📦 Ending Inventory Layers
What is the FIFO Method?
📦 First In, First Out (FIFO)
FIFO assumes that the oldest inventory items are sold first. When calculating Cost of Goods Sold (COGS), you use the cost of the earliest purchased items. The remaining inventory consists of the most recently purchased items. FIFO is widely accepted under both GAAP and IFRS accounting standards.
- Track Beginning Inventory: Record the quantity and cost per unit of starting inventory.
- Record Purchases: Log each purchase with date, quantity, and unit cost in chronological order.
- Calculate Goods Available: Beginning Inventory + Purchases = Goods Available for Sale.
- Apply FIFO to Sales: Allocate sold units starting from the oldest inventory layer first.
- Calculate COGS: Sum the cost of all units sold (from oldest to newest layers).
- Calculate Ending Inventory: Remaining units × their respective costs.
FIFO Formulas
Cost of Goods Sold (FIFO)
Ending Inventory (FIFO)
Goods Available for Sale
Verification Formula
FIFO vs LIFO Comparison
| Aspect | FIFO (First In, First Out) | LIFO (Last In, First Out) |
|---|---|---|
| Inventory Flow | Oldest items sold first | Newest items sold first |
| COGS in Inflation | Lower (older, cheaper costs) | Higher (newer, pricier costs) |
| Ending Inventory | Higher (recent prices) | Lower (older prices) |
| Net Income | Higher in inflation | Lower in inflation |
| Tax Impact | Higher taxes (more profit) | Lower taxes (less profit) |
| GAAP Allowed | ✅ Yes | ✅ Yes |
| IFRS Allowed | ✅ Yes | ❌ No (prohibited) |
| Best For | Perishables, fashion, tech | Non-perishables, stable prices |
FIFO Example Calculation
📝 Example: Electronics Store
Beginning Inventory: 100 units @ $10 = $1,000
Purchases:
- Feb 1: 50 units @ $12 = $600
- Mar 15: 75 units @ $15 = $1,125
- Apr 20: 25 units @ $18 = $450
Goods Available: 250 units = $3,175
Units Sold: 150 units
FIFO COGS: 100 @ $10 + 50 @ $12 = $1,000 + $600 = $1,600
Ending Inventory: 75 @ $15 + 25 @ $18 = $1,125 + $450 = $1,575
Verification: $1,600 + $1,575 = $3,175 ✓
When to Use FIFO
✅ Best For
- Perishable goods (food, medicine)
- Fashion & seasonal items
- Technology products
- Industries with rising costs
- International companies (IFRS)
- Accurate inventory valuation
⚠️ Considerations
- Higher taxes in inflationary periods
- May not match physical flow
- Requires detailed record-keeping
- COGS may be understated
- Consider LIFO if tax savings priority
Official Resources
Frequently Asked Questions
COGS (FIFO) = Cost of oldest inventory layers sold first. Calculate by multiplying units sold by their respective costs, starting from beginning inventory, then oldest purchases until all sold units are accounted for.
Ending Inventory (FIFO) = Goods Available - COGS. Since the oldest items are sold first, ending inventory consists of the most recent purchases. Multiply remaining units by their respective purchase costs.
The FIFO method assumes first items purchased are first items sold. Formula: COGS = Σ(Units from oldest layers × Cost per unit). Ending Inventory = Σ(Remaining units from newest layers × Cost per unit).
It depends. FIFO shows higher profits and is required under IFRS. LIFO can reduce taxes during inflation but is banned under IFRS. For perishables and tech, FIFO matches physical flow better. Consult your accountant for your specific situation.
During inflation, FIFO results in lower COGS (using older, cheaper costs), higher gross profit, and therefore higher income taxes. LIFO would give the opposite effect. The IRS accepts both methods if applied consistently.
Yes, but it's a change in accounting method requiring IRS approval (Form 3115). There may be tax implications. Consult a CPA before making this change.
Beginning inventory is the stock on hand at the start of the accounting period. Under FIFO, it's the oldest inventory layer and would be the first to be allocated to COGS when sales occur.
Use the verification formula: COGS + Ending Inventory = Goods Available for Sale. If these don't match, check your layer allocations and calculations.
Yes! FIFO is accepted under both US GAAP and International Financial Reporting Standards (IFRS). Unlike LIFO, which is only allowed under GAAP, FIFO is universally accepted.
FIFO is common in: grocery stores, pharmacies, restaurants (perishables), electronics retailers, fashion (seasonal items), and any industry where older inventory should be sold first to prevent obsolescence or expiration.
Created by OmniCalculator.space — Your trusted source for accounting calculators.
Last Updated: January 2025
