CAT / FIA FFA Syllabus D. Recording Transactions And Events - FIFO and AVCO - Notes ^{7 / 10}

FIFO (first in, first out)

FIFO assumes that materials are issued out of inventory in the order in which they were delivered into inventory, i.e. issues are priced at the cost of the earliest delivery remaining in inventory

AVCO (average cost)

AVCO calculates a weighted average price for all units in inventory. Issues are priced at this average cost, and the balance of inventory remaining would have the same unit valuation.

A new weighted average price is calculated whenever a new delivery of materials into store is received. 

LIFO is no longer permitted under IAS 2.