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FIFO vs moving average: an example

Here’s how the two valuation methods in RockifyERP give different costs for the same purchases.

What you need to know

You buy 10 bags at KES 600, then 10 bags at KES 700.
You sell 10 bags.
FIFO: cost of sales = 10 × 600 = KES 6,000; remaining stock valued at 700.
Moving average: average = 650; cost of sales = KES 6,500; remaining stock valued at 650.

Tip: When prices are rising, FIFO shows a higher profit and higher closing stock value.

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