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Last in, first out method (LIFO)

Last in, first out or LIFO for short is an accounting method of inventory valuation, under which goods which are the latest to be added to inventory will be the first to be sold. Those items of stock that are obtained earlier tend to remain longer in inventory until they too are sold. The value of the closing inventory is therefore calculated from the cost of the goods that are purchased much earlier.

The goods sold can still be the first purchased ones provided the cost of the goods sold is based on that of the latest goods bought.


Goods Closing Balance

Purchased Sold Goods on Hand Value of Goods Monthly Total




$ $
20XX




Mar 20 at $20 each
20 at $20 each
400
Apr 30 at $25 each
20 at $20 each 400



30 at $25 each 750 1,150
May
10 at $25 each 20 at $20 each 400



20 at $25 each 500 900
Jun
20 at $25 each 20 at $20 each
400
Jul 20 at $30 each
20 at $20 each 400



20 at $30 each 600 1,000
Aug
10 at $30 each 20 at $20 each 400



10 at $30 each 300 700
Sep 30 at $35 each 10 at $30 each




30 at $35 each 20 at $20 each
400

The closing stock has the value of $400 as at end of September 20XX

Last Updated (Saturday, 09 October 2010 20:00)