Inventory Accounting: Methods & How It Works

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I like to think of inventory accounting like managing your smartphone apps.

You keep track of what is installed (inventory levels), what is used most often (inventory movement), and what takes up the most space (value). You create value (sales) by clearing out space. To clear that space, you might employ the First-In-First-Out (FIFO) method and delete older, unused apps first. Or you could use the Last-In-First-Out (LIFO) method and leave the old apps and clear out newer ones.

Regardless of the chosen method, your end goal is the same — monitoring and managing the items you use to create value. Inventory accounting is the process of valuing and ...