Should I value inventory FIFO or weighted average?

In an inflationary or rising-price environment, FIFO (first-in, first-out) assumes the oldest, cheaper stock sold first, so it shows a lower cost of goods sold and a higher profit. The weighted-average method spreads cost evenly across all units, giving a steadier, less month-to-month volatile profit figure.

Neither method is absolutely "more correct" — the choice depends on your activity (perishable stock versus long-held inventory) and how stable prices are. What matters is that the method is fixed and applied consistently every year; switching between them whenever it flatters reported profit is an accounting red flag that draws an auditor's attention immediately. RASEEKH helps you choose and document one inventory valuation policy and stick to it.