Question
During a period of steadily rising purchase prices, FIFO (compared with weighted-average) reports:
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 2 — Inventories
Under a periodic system nothing updates inventory during the year; purchases accumulate in their own account and cost of sales is derived at the period end as opening inventory plus net purchases less closing inventory. The closing figure comes from a physical count, not from the ledger.
Common mistakes
- Recording a cost-of-sales entry at the time of each sale — that is the perpetual system.
- Omitting freight inwards, purchase returns or purchase discounts from the net purchases figure.
- Transposing opening and closing inventory in the cost-of-sales computation.
Further readingIAS 2: costing methods and NRV