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Perpetual LIFO Method:
COGS = Recent Purchases
Ending Inventory = Oldest Costs
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Perpetual LIFO (Last-In, First-Out) is an inventory valuation method where the most recently purchased items are assumed to be sold first. This method updates inventory records continuously after each purchase and sale.
The calculator follows these steps:
1. Processes purchases in the order they were made
2. For each sale, uses the most recent purchases first
3. Calculates COGS by multiplying quantities sold by their purchase prices
4. Values ending inventory using the oldest remaining costs
Details: LIFO is important for inventory management and financial reporting. It typically results in higher COGS and lower taxable income during periods of rising prices.
Tips: Enter purchases in "quantity@price" format (e.g., 100@10, 200@12). Enter sales as quantities (e.g., 150, 100). The calculator will process sales in the order they occurred.
Q1: When is LIFO most appropriate?
A: LIFO is most appropriate when inventory costs are rising and you want to match current costs with current revenues.
Q2: What's the difference between perpetual and periodic LIFO?
A: Perpetual updates after each transaction, while periodic calculates COGS only at period end.
Q3: Does LIFO reflect actual physical flow of goods?
A: Rarely - it's an accounting assumption that may not match physical flow.
Q4: Is LIFO allowed under IFRS?
A: No, LIFO is prohibited under IFRS but allowed under US GAAP.
Q5: How does LIFO affect taxes?
A: In periods of inflation, LIFO typically results in lower taxable income than FIFO.