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what is the difference between FIFO and LIFO?

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Posted on by MANJUNATH DHANAPAL

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what is the difference between FIFO and LIFO? - In costing method in business cental - version 18.

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YUN ZHU 74,141 Super User 2024 Season 2 on at

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RE: what is the difference between FIFO and LIFO?

Hi, as a complement, I recommend this series and hope it helps.

https://www.youtube.com/watch?v=7oPbZ8C0PhA&list=PLJDdNuGpFiapcN11iVsKJgSsYZVk8IjPr

Thanks.

ZHU
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Rob F. 483 on at

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RE: what is the difference between FIFO and LIFO?

These are different inventory valuation methods used in accounting and are not unique to Business Central. Which method to use is usually a decision a company makes based on regulatory requirements in the jurisdiction where they operate. Here are some links that may help explain the methods in more detail, and I would also consult the accounting standards and tax regulations of the relevant country.

Design Details - Costing Methods - Business Central | Microsoft Docs

LIFO vs. FIFO: Inventory Valuation Explained (investopedia.com)
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raelhefn on at

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RE: what is the difference between FIFO and LIFO?

docs.microsoft.com/.../design-details-costing-methods

FIFO

An item's unit cost is the actual value of any receipt of the item, selected by the FIFO rule.

In inventory valuation, it is assumed that the first items placed in inventory are sold first.

When to use

In business environments where product cost is stable. (When prices are rising, the balance sheet shows greater value. This means that tax liabilities increase, but credit scores and the ability to borrow cash improve.) For items with a limited shelf life, because the oldest goods need to be sold before they pass their sell-by date.

LIFO

An item's unit cost is the actual value of any receipt of the item, selected by the LIFO rule.

In inventory valuation, it is assumed that the last items placed in inventory are sold first.

When to use

Disallowed in many countries/regions, as it can be used to depress profit. (When prices are rising, the value on the income statement decreases. This means that tax liabilities decrease, but the ability to borrow cash deteriorates.)

For more information Please refer to:

https://community.dynamics.com/business/f/dynamics-365-business-central-forum/421968/business-central-costing-method

https://www.silverw.com/blog/fifo-costing-in-dynamics-365/