What is FIFO Costing?
FIFO stands for First In, First Out. In retail and commerce, the cost of raw materials and wholesale goods changes frequently. You might buy 10 t-shirts from a distributor for ₹200 each in May, and another 10 t-shirts for ₹250 each in June.
Under FIFO accounting, StoreYug assumes that the first items purchased are the first items sold. This is the global accounting standard for retail inventory valuation.
How FIFO Operates in StoreYug
Imagine this simple timeline:
- May 10: You add 10 units at ₹200 each (Batch 1: Total value ₹2,000).
- June 05: You add 10 units at ₹250 each (Batch 2: Total value ₹2,500). Your total on-hand stock is 20 units worth ₹4,500.
- June 12: A customer buys 12 units. StoreYug automatically drains:
- All 10 units from Batch 1 (cost: 10 × ₹200 = ₹2,000). Batch 1 is now marked exhausted.
- 2 units from Batch 2 (cost: 2 × ₹250 = ₹500). Batch 2 now has 8 units remaining.
- Result: Your remaining inventory is 8 units at ₹250 = ₹2,000 total inventory value. Your Cost of Goods Sold for that order is exactly ₹2,500.
Why Does This Benefit Your Store?
- Accurate Gross Profit: You know your exact profit margin on every sale instead of guessing with rough estimates.
- Realistic Balance Sheet: Your inventory asset valuation always reflects the actual current market prices of your newest stock.
- Zero Manual Work: You never have to manually select batch numbers during order fulfillment. StoreYug’s FIFO engine handles batch consumption in the background automatically.
💡 Specific Batch Targeting: When writing off damaged or expired items, StoreYug gives you the flexibility to either let FIFO deduct automatically or pick a specific purchase batch to deduct from!