FIFO, LIFO, & Weighted Average Accounting Methods

Today, there is a variety of accounting methods used by companies. In this regard, it is possible to distinguish such methods as weighted average accounting, FIFO and LIFO. These methods are different but still applied successfully by different companies. The major difference between these methods is in the way each method calculates inventory and cost of goods sold.

FIFO accounting method stands for the first in, first out. FIFO accounting means that the costs assigned to goods are the costs for the first goods purchased by customers. In other words, the company assumes that the first goods sold are the oldest or the first goods bought. In stark contrast, LIFO accounting stands for the last in first out. This accounting method assumes that the last or latest items bought are the first items to be sold. In such a way, LIFO is mirrors the FIFO approach in the contrary direction.

In this regard, the weighted average cost accounting is a compromise between the FIFO and LIFO. The weighted average cost method uses the average of the costs of the goods to assign costs. In other words, weighted average uses the formula: Total cost of items in inventory available for sale divided by total number of units available for sale. Such approach allows measuring the average costs of goods on the ground of the average sales, instead of focusing on the first or last goods produced or sold as is the case of other accounting methods, such as FIFO and LIFO.

Thus, accounting methods differ on the ground of the method of calculating inventory and costs of goods. In spite of differences, each method may be effective but companies should decide which of them match their needs the best.

The terms offer and acceptance. (2016, May 17). Retrieved from

[Accessed: November 27, 2021]

"The terms offer and acceptance." freeessays.club, 17 May 2016.

[Accessed: November 27, 2021]

freeessays.club (2016) The terms offer and acceptance [Online].
Available at:

[Accessed: November 27, 2021]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: November 27, 2021]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: November 27, 2021]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: November 27, 2021]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: November 27, 2021]
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