Inventory — Excel guide
What a unit cost and when it left the shelf: cost-flow methods change COGS, profit, and taxes — without a single physical box moving differently.
The COGS equation
Beginning inventory + purchases − ending inventory = cost of goods sold. Miscount ending inventory and both this year's AND next year's profit are wrong.
Cost-flow methods, rising prices
FIFO sells the old cheap units first; LIFO sells the newest expensive ones first (US-only — IFRS bans LIFO); weighted average blends.
| Method | COGS | Profit & taxes | Balance-sheet inventory |
|---|---|---|---|
| FIFO | Lower | Higher | Near current cost |
| LIFO | Higher | Lower | Old, understated cost |
| Weighted avg | Middle | Middle | Middle |
Perpetual vs periodic
Perpetual systems update inventory and COGS with every sale (what modern software does); periodic waits for a physical count and computes COGS by the equation above.
Lower of cost or market
Inventory that's lost value gets written DOWN to market/NRV — conservatism in action. It never gets written back up above cost under US GAAP.