Periodic FIFO method definition
/What is the Periodic FIFO Method?
Periodic FIFO is a cost flow tracking system that is used within a periodic inventory system. Under a periodic system, the ending inventory balance is only updated when there is a physical inventory count. At that time, if units have been consumed, then the costs of the oldest units are removed from the cost layering database for the inventory and charged to the cost of goods sold. This means that the costs of only the most recently acquired inventory still remain in the inventory. This assignment of costs can be substantially delayed if there has not been a physical inventory count for a number of accounting periods.
Accounting for Periodic FIFO
Under this method, sales are recorded when they occur, but the cost of goods sold is updated later, when there is a physical inventory count.