FIFO + LIFO valuation of inventory balance

Can anyone help me understand abit better why when then FIFO Costing method is used that the inventory balance is valued at the most RECENT purchase cost?
Is this because what's left in stock is mostly the most recent purchased items?
Is this because what's left in stock is mostly the most recent purchased items?
Best Answer
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Bertie West Midlands Posts: 376
FIFO - what you buy first, you sell first.
Take bread as an example, a shop would (well should, although some shops like selling stale bread!) sell its first batch before the next in.
If batch #1 costs 90p each loaf, and batch#2 costs £1, the closing inventory will consist mainly of £1 units.
FIFO and AVCO are the choice of IAS 2 for statutory reporting.
Answers
What's IAS 2?
It stipulates how inventories should be accounted.
From memory you'll start to see accounting standards in level 3.