Last In First Out (LIFO) costing method

LIFO is one of the stock valuation methods used for calculating closing balance of inventory in Tally.ERP 9. It is further classified into two methods, LIFO annual and LIFO perpetual, which are detailed in this topic.

LIFO ANNUAL

The stock items ‘last’ lot ‘input’ becomes the ‘first’ to get consumed, while the earlier/earliest lots remain unused under the current Financial Year. LIFO Annual restricts the LIFO behavior to the present Financial Year and treats the Opening Stock as the ‘First Lot’.

LIFO PERPETUAL

The stock items purchased in Last LOT are sold FIRST. In Perpetual LIFO, the very first input into the system, even if it was 10 years ago (!) gets treated as the ‘First Lot’.

When these entries are passed in Tally.ERP 9, closing value will appear as below:


As on 1st April 2009:
Purchase of 10.00 nos for Rs.100/- = 1000/- (Main Location = B1 - Batch)

As on 2nd April 2009:
Purchase of 10.00 nos for Rs. 150/- = 1500/- , hence the ‘Closing Value’ will be 1000 + 1500 = 2500/- (Main Location = B1 - Batch)

As on 3nd April 2009:
Sale has been done from ‘Main Location -> B1- Batch’ for 5 nos. Now Last Purchase is First Out i.e., purchase as on 2nd April is the last purchase.

Closing Value will be calculated as below:

Remaining stock item from 2nd April purchase is   5.00 nos x 150   = 750
Stock item from 1st April purchase is                    10.00 nos x 100 = 1000
1750/-

As on 4th April 2009:
Purchase of 10.00 nos for Rs. 200/- = 2000/- ( Chennai Godown -> B2 - Batch) , hence the ‘Closing Value’ will be:

Purchase as on 4th April =  2000 (10 x 200)
Purchase as on 2nd April =   750 (5 x 150)
Purchase as on 1st April  = 1000 (10 x 100)
3750/-

As on 5th April 2009:
Sale has been done from ‘Chennai Godown - B2- Batch’ for 5 nos. Now Last Purchase is First Out i.e., purchase as on 4th is the last purchase.

Closing Value will be calculated as below:

Remaining stock item from 4th April purchase is  5.00 nos x 200    =  1000
Stock item from 2nd April purchase is                   5.00 nos x  150 =    750
Stock item from 1st April purchase is                   10.00 nos x 100 =  1000
2750/-

s on 5th April 2009:
Sale has been done from ‘Chennai Godown - B2- Batch’ for 5 nos. Now Last Purchase is First Out i.e., purchase as on 4th is the last purchase. 

Closing Value will be calculated as below:

Remaining stock item from 4th April purchase is  5.00 nos x 200    =  1000
Stock item from 2nd April purchase is                   5.00 nos x  150 =    750
Stock item from 1st April purchase is                   10.00 nos x 100 =  1000
                                                                                                    2750/-