For small- to medium-sized businesses we recommend a periodic recording of inventory on your books. This can be done on a monthly basis
Next, let’s take a look at how you account for the value (COGS) of your inventory based on three primary methods: FIFO, LIFO, and Average Cost Valuation.
FIFO – FIFO stands for First In First Out and assumes that the first goods purchased are the first ones applied to Cost of Goods Sold.
LIFO – LIFO stands for Last In First Out and assumes that the last goods purchased are the first costs applied to Cost of Goods Sold.
Average Cost Valuation – Cost of Goods Sold is determined by calculating the weighted-average unit cost of your inventory.
So we do not overburden our customers, therefore we choose a 75 day period to obtain a weighted-average unit cost of your inventory.