Eleven POS
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Why the valuation method matters
When you buy the same product at different prices, you need a rule for which cost goes out with each sale. The rule changes your cost of goods sold, your closing stock value and therefore your profit and tax.
The methods
- FIFO (first in, first out) — the oldest stock is sold first. Closing stock is valued at the latest prices. When prices are rising, FIFO shows higher profit.
- Weighted average — every purchase is blended into one average cost, recalculated after each purchase (perpetual / moving average). Smooths out price swings; common in retail and distribution.
- LIFO (last in, first out) — the newest stock is sold first. Not allowed under IAS 2 / BFRS, so it is shown here for comparison only.
Example
Opening 20 bags at ৳2,400, buy 30 at ৳2,500, sell 35. FIFO costs the sale as 20 × 2,400 + 15 × 2,500 = ৳85,500. Weighted average costs it at ৳2,460 × 35 = ৳86,100.
Choose one and stay consistent
Accounting standards require the same method year after year for similar items. Retail and wholesale businesses in Bangladesh most often use weighted average; perishable goods suit FIFO. A POS with inventory does this valuation automatically on every sale.