First In First Out is the traditional method of valuation.
The value of the current closing stock is treated as a collection of the ‘residual’ stock working back from the last purchase, until the Financial Year opening stock. It is assumed that the goods issued or sold currently are those which represent the earliest purchased amongst the goods sold in inventory. This would mean that the goods which remain in stock after the sales/issues are those which represent the most recent purchases.
Entries are shown below:
|
Date |
Vch Type |
Godown |
Batch |
Inwards |
Outwards |
||||
|
|
|
|
|
Quantity |
Rate |
Value |
Quantity |
Rate |
Value |
|
01/04/09 |
Opening Bal |
Chennai Godown |
B2 |
6.00 nos |
95.00 |
600.00 |
|
|
|
|
01/04/09 |
Opening Bal |
Main Location |
B1 |
10.00 nos |
100.00 |
1000.00 |
|
|
|
|
01/04/09 |
Purchase |
Main Location |
B1 |
10.00 nos |
100.00 |
1000.00 |
|
|
|
|
02/04/09 |
Purchase Bills Pending |
Chennai Godown |
B2 |
2.00 nos |
175.00 |
350.00 |
|
|
|
|
02/04/09 |
Sales |
Main Location |
B1 |
|
|
|
5.00 nos |
400.00 |
2000.00 |
|
02/04/09 |
Purchase |
Chennai Godown |
B2 |
10.00 nos |
200.00 |
2000.00 |
|
|
|
|
|
|
|
|
32.00 nos |
122.81 |
3930.00 |
5.00 nos |
400.00 |
2000.00 |
When the above entries are passed in Tally.ERP 9, closing value will appear as shown below:
FIFO method will consider the ‘First In First Out’. When ‘Godown’ and ‘Batches’ exists, it will walk through the ‘Godown’ and ‘Batches’.
Let us now analyze how the closing value has arrived for the above entries.
Opening Balance : Chennai godown => B2 = 6.00 nos Rs. 95.00/-
Mail Location => B1 = 4.00 nos Rs. 90.00/-
Purchase : Main Location => B1 = 10.00nos Rs.100.00/-
Hence, On 1st April 2009:
4 nos (Opening Bal => Main location => B1) x 90 = 360
6 nos (Purchase => Chennai Godown => B2) x 95 = 570
10 nos (Purchase => Main location => B1) x 100 = 1000
1930/-
On 2nd April 2009:
Receipt Note was raised for 2.00 nos and sales (Main Location => B1) was raised for 5 nos.
Hence Closing Quantity = 17 nos
Let see how Closing Value is getting calculated:
A sale was done from ‘Main Location’ - ‘B1’ Batch. and Receipt Note was raised from ‘Chennai Godown’ - ‘B2’ location.
Let us arrive at the cost of 2.00 nos of the ‘Receipt Note’.
Closing Value of ‘Chennai Godown’ as on 02.04.2009 is Rs. 95/- i.e., Opening Balance for Chennai Godown is 570/6 = 95/- (Total Inward Quantity/Total Inward Value) . After this there are no transactions for ‘Chennai Godown’ - B2. Hence closing rate is Rs. 95/-
Receipt Note 2 nos x 95 = 190
Purchase (10 nos – 1 nos (for sales)) 9 nos x 100 = 900
Opening bal ( Chennai Godown) 6 nos x 95 = 570
1660/-
On 3rd April 2009:
Closing Quantity = 27 nos
Let us how Closing Value is getting calculated:
Purchase has been raised from ‘Chennai Godown’ - ‘B2’ Batch. As on 3rd April 2009,
Closing value for ‘Chennai Godown’ --> B2 batch is Rs. 2861.25/-
Remaining from ‘Main Location’ --> B1 batch is Rs. 900.00/-
Rs. 3791.25/-
Stock Items purchased FIRST are sold FIRST across the Financial Year (i.e. First LOT could be from any previous Financial Year entry).