Definition
Inventory valuation (average cost and FIFO)
Inventory valuation is the total cost of the stock you hold; average cost values each unit at the running average of what you paid for that item, and FIFO values it at what you paid for the batches still on the shelf.
Average cost is the simplest for a small shop whose purchase prices move a little each order, and it is what most inventory apps use by default. FIFO (first in, first out) costs each sale at the price of the oldest units you still hold, so when prices rise or fall, your profit and stock value follow what you actually paid. LIFO, the third method, is rarely used by small businesses.
Valuation matters at tax time, for insurance, and for knowing how much cash is tied up on the shelf.
In Inventory Now
The summary shows current inventory value at cost and at retail for any filter. Average cost is the default; Professional can switch to FIFO.
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