FIFO Method in ERPinCloud

FIFO – First In, First Out:-

FIFO Method is as simple as it sounds. The first lot of stock that comes into your warehouse should be the first that goes out including sending the goods to stores or sending them directly to customers.

So, FIFO is method of moving stock through your warehouse. FIFO is used for inventory management.

Let us see the Flow of FIFO in ERPinCloud

Configuration:-

1. Create product and select costing method as FIFO and set cost price.

Go to ->>Warehouse->>Product->>Procurements->>Select Costing Method as FIFO & Set the Cost Price

1. Set inventory valuation as real time automated and set stock input account and output account.

Go to ->>Warehouse->>Product->> Set Inventory Valuation as Real Time (automated) & Configure-Stock Input Account & Stock Output Account

How to use costing method FIFO in ERPinCloud:-

Step 1: Create purchase order-1 of 4 quantities for that product and set different unit price other than defined in product and click on receive product

Step 2: Check Journal Entry and the amount which is calculated based on the cost price defined in purchase order-1

Cost price= 80 (Defined in purchase order-1)

80*4=320 (4 =number of quantities)

Step 3: Check product cost price which remains unchanged

Step 4: Create purchase order-2 of 5 quantities for that product and set different unit price and click on receive product

Step 5: Check Journal Entry and the amount which is calculated based on the unit price defined in purchase order-2

Unit price= 110 (Defined in purchase order-2)

110*5=550 (5 =number of quantities)

Step 6: Check product cost price which remains unchanged

Step 7: Create Sale order of 7 quantities of that product which has costing method as FIFO and click on deliver

Step 8: Check Journal Entry and the amount which is calculated based on FIFO

Calculation: Purchase Order-1 is created for 4 quantities at a cost price of 80

Purchase Order -2 is created for 5 quantities at a cost price of 110

As Sales order is for 7 quantities, so 4 quantities is charged at cost price of 80 (4*80=320)

And remaining 3 quantities is charged at cost price of 110 (3*110=330)

As costing method is FIFO 4 quantities is charged as per first purchase order cost price and remaining 3 quantities is charged as per second purchase order cost price

Step 9: Product cost price is changed

As Sales order is for 7 quantities, so 4 quantities is charged at cost price of 80 (4*80=320)

And remaining 3 quantities is charged at cost price of 110 (3*110=330)

As costing method is FIFO 4 quantities is charged as per first purchase order cost price and remaining 3 quantities is charged as per second purchase order cost price

So cost price of product is calculated as (330+320)/7=92.86

You can Try Free Product Trial Today: http://www.erpincloud.com/signup-cloud-erp-free-trial/

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