FIFO inventory and cost of goods sold
From shelf to sale
Try the interactive lessonLet’s make it simple.
Inventory is an asset until it is sold. When sold, its cost becomes an expense called cost of goods sold. FIFO assumes the oldest units are sold first.
Picture this.
Buy 10 notebooks at $2, then 10 at $3. Sell 10 using FIFO: cost of goods sold is $20, and the remaining inventory is $30.
Check your understanding
You buy 10 notebooks at $2, then 10 at $3. Sell the first 10 using FIFO. What is cost of goods sold?
Think it through, then reveal the explanation
FIFO means first in, first out. The oldest 10 cost $2 each, so cost of goods sold is $20.
Build the bigger picture.
- Purchase inventory
- Record an asset
- Sell the inventory
- Recognize cost of goods sold
Track the cost as inventory becomes an expense.
Now make it move.
Bring this idea to life with interactive practice, a 3D illustration and tips along the way. Your progress stays on your device.
Practice Inventory Stories