With Advanced Inventory, you have the option to switch from Average Cost to FIFO (First In, First Out) to calculate the value of inventory sold and on-hand. When you use FIFO, QuickBooks computes inventory values based on the assumption that the first inventory items received are the first sold.
Important: When you switch from average costing to FIFO, QuickBooks changes the following reports:
- Inventory Valuation reports
- Balance Sheet reports
- Profit and Loss reports (cost of goods sold)
To switch from average cost to FIFO:
- Open Advanced Inventory Settings for FIFO:
- Select Edit then Preferences.
- From the left menu, select Items & Inventory, then choose the Company Preferences tab.
- Select Advanced Inventory Settings, then choose the FIFO tab.
- Select Use FIFO starting on and choose a date.Note: QuickBooks recalculates all inventory-related transactions starting on the date you enter. You can start tracking FIFO on any date. If you decide to turn off FIFO later, uncheck Use FIFO starting on, and QuickBooks will once again calculate inventory value using the average cost method.
- Select OK then OK again to close the Preferences window.