Applies to: Office Accounting Professional
Based on feedback from thousands of small businesses, the designers of Microsoft Office Accounting 2008 decided to base the stock valuation on the first-in first-out (FIFO) method.
With the FIFO method, it is assumed that the stock products will be sold in the order they were purchased.
This is how FIFO works:
The cost of sales for stock products sold on invoices (and cash sales) is calculated based on the purchase price (in date order) for each product on the invoice.
The remaining products in stock are valued based on later purchases.
Oldest products are in principle sold first.
In the case of back-dated transactions, cost of sales is recalculated.
If the Adjust Stock Quantity and Value form is used, the remaining stock is valued at that date, and the FIFO order is reset as if all products were sold at their current cost and purchased at the new value.
When selling stock products, Office Accounting 2008 uses the FIFO cost for stock products on hand to deplete products from stock. For example, if you purchase five units of a product for £10.00 each and another five units of the same product for £12.00 each, Accounting 2008 depletes stock for the next product you sell at rate of £10.00.
Stock Valuation report
The Stock Valuation report contains all the financial transactions for each stock product that leads to the current stock value.