English-Tagalized Accounting Lesson: FIFO/LIFO Methods

Cost Accounting

 ‘First In, First Out’ (FIFO) method of accounting for inventory
That means the first supply you have purchased will be sold before selling the new arrival. 

Kung anong unang binili siyang unang ibebenta.

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For example here is what makes-up our current stocks inventory:

Halimbawa ito ang nilalaman ng paninda mo na binili mo sa mga sumusunod na puhunang halaga:

10 pcs.  pillows  bought @  P50.00 each Oct. 30
15 pcs. pillows bought @ P70.00 each Nov. 15

Case:
15 pillows were sold. 
Nakabenta ng 15 pillows.

That means our computation would be adding the following inventory costs:

Ang pagkukuwenta natin ay ang total ng mga sumusunod na halaga mula sa ating imbentaryo:



10 x      P  50.00   coming from Oct.30 stocks (mula sa binili natin nuong Oct.30)
5 x             70.00   coming from Nov.15 (mula sa binili natin ng Nov.15)
  
Why we did not based it all from the 15 pcs. we bought last Nov. 15 when it is enough to cover the sales, because we employ the FIFO method. We need to prioritize selling the stocks we bought earlier.  We will only get from the latest stocks if our previous stocks run-out.

Bakit hindi natin kinuha/binase ang presyo nung mga nabenta natin sa Nov.15 stock e kasya naman at 20 pcs. yun? Kasi kailangan nating unahing ubusin yung mas luma o mas una nating biniling stock remember FIRST IN, FIRST OUT. Kukuha lamang tayo sa bagong stocks kung mangyaring kulangin yung dati natin.

This is a better way for me because the stocks do not get old nor expired on the shelf.  And if the consumers are witty, they will notice the difference in price when the stocks from different date are sold. They will be very happy that the store does not price the items they have on stock and bought earlier were not  based on the current price if it happens that there is a current commodity price hike.

Para sa akin mas mabuti ang paraang ito dahil hindi naluluma ang stocks sa bodega naiiwasan ang pagka- sira ng mga produkto. Kung minsan bumibili lamang tayo ng karagdagag stock upang huwag maubusan hindi naman para iyon ang ibenta agad. Kung matalino ang mamimili nalalaman agad nila kung bakit magkaiba ang presyo ng parehong produkto sa iisang resibo. At matutuwa sila kapag nalamang hindi lang ibinase sa mas mataas na halaga ang presyo ng paninda kahit nagtaas na ang presyo sa merkado.

In LIFO method of cost accounting (we employ the Last In, First Out method)

The resulting amount of goods sold would be a lot different, since the computation will just be based from the stocks last bought. Only if in case, the quantity is not enough that is the time to get from the older stocks.

Ang pagkukuwenta ng halaga ng nabenta ay ibabase lamang natin sa huling stocks na binili ngunit kung kukulangin at mayroon pang dati saka p lamang tayo kukuha/magprepresyo sa lumang stocks.

Say we sold 20 pillows. We only have 15 from Nov.15 (LAST IN-huling pumasok na imbentaryo) still based on the inventory prices above:

Sabihin nating nakabenta tayo ng 20 unan. 15 na lang ang stokcs natin mula sa latest nating pag-angkat ng produkto (Nov.15) pero mayroon pang stocks mula sa binili natin nang Oct.30 gamit pa rin natin ang mga presyo ng produkto sa itaas:

i.e.
15 x P70          we get 15 pillows from Nov.15
5 x P50            we only get 5 pillows from Oct.30 since we need to complete our sales of 20 pillows


I hope that I have given you clearer understanding of the FIFO and LIFO Methods in Accounting to help you with your lessons especially if you are a student. And I do hope too that it will help you a lot with your assignments or selling practices.


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Family, Daily Living & Style by Angelita Galiza-Madera is licensed under a Creative Commons Attribution 4.0 International License.