FIFO (First In First Out)

What Is FIFO in Zoho Inventory?

FIFO (First In, First Out) is an inventory costing method where the purchase cost of the earliest received stock is used to calculate cost of goods sold (COGS) when items are sold. Zoho Inventory supports FIFO alongside average cost valuation, selectable at the organisation level.

How FIFO Works

If you bought 10 units at Rs 100 in January and 10 units at Rs 120 in February, and then sell 10 units in March, FIFO assigns Rs 100 as the cost of those 10 sold units (the January batch). The remaining 10 units carry the Rs 120 cost.

FIFO vs Average Cost

FIFO more accurately reflects current replacement costs in rising price environments. Average cost smooths out price fluctuations. Your choice affects COGS, gross profit, and inventory asset value on the balance sheet, so consult your accountant before switching methods.