FIFO, LIFO, and average cost ESTIMATE

Ending inventory and cost of goods sold from the same purchase layers, under three costing flows.

Important: Educational estimates only. Not tax, legal, or accounting advice. AI Accounting Desk is not a CPA firm and does not provide professional services. Verify figures with a licensed professional and official IRS sources (irs.gov) before making decisions.

General information, not tax or legal advice. Adopting LIFO for a tax return has its own IRS rules, including Form 970. This page only costs the layers you type. It does not decide which method you may use.

Purchase layers, oldest first

Result ESTIMATE

FIFO cost of goods sold
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LIFO cost of goods sold—
Weighted-average cost of goods sold—
FIFO ending inventory—
LIFO ending inventory—
Average ending inventory—

Same goods, three stories

FIFO treats the oldest units as the ones sold. LIFO treats the newest units as the ones sold. Weighted average uses one unit cost: total cost of the layers ÷ total units. On 10 units at $5 and 10 units at $8, with 12 sold, FIFO cost of goods sold is $66 (10 × $5 + 2 × $8) and ending inventory is $64. LIFO cost of goods sold is $90 (10 × $8 + 2 × $5) and ending inventory is $40. The average unit cost is $6.50, so 12 units cost $78 and 8 remain at $52. The three ending balances plus the three costs of goods sold each add back to the $130 you paid. If they do not, the arithmetic is wrong.

The cost of goods sold calculator uses beginning inventory, additions, and ending inventory. It does not care how you picked the ending number. This page is how you pick it from layers. A physical count still has to agree with the units. The year-end checklist is where that count belongs.

Books and the tax return can differ

Many small firms keep one method in the general ledger. Changing the tax method is a filing decision, and LIFO in particular is not a switch you make by renaming a spreadsheet column. IRS Publication 538 discusses inventory methods, and Form 970 is the LIFO adoption form. This tool stops at the arithmetic.

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