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Perpetual inventory records: FIFO and LIFO
Edexcel IAL Accounting · WAC11 The Accounting System and Costing
With a perpetual system, a stores ledger card is updated after every receipt and issue, so the value of inventory is always known. Under LIFO this can give a different answer from the periodic method (spec 1.4.2).
Stores ledger card
Each line shows the receipt or issue and the balance after it. For each issue, price the units using the method:
- FIFO: take units from the oldest batch still held.
- LIFO: take units from the newest batch held at the date of the issue.
Keep track of the batches (layers) left after each issue.
| Date | Receipts | Issues (FIFO) | Balance |
|---|---|---|---|
| 1 May | 300 @ £4 | 300 units, 1,200 | |
| 8 May | 200 @ £5 | 500 units, 2,200 | |
| 15 May | 300 @ £4 + 50 @ £5 = 1,450 | 150 units, 750 | |
| 22 May | 250 @ £6 | 400 units, 2,250 | |
| 29 May | 150 @ £5 + 50 @ £6 = 1,050 | 200 units, 1,200 |
Perpetual FIFO
Perpetual LIFO
Under LIFO, an issue can only use batches that have already arrived, so the 15 May issue uses the 8 May batch first, then the 1 May batch.
| Date | Receipts | Issues (LIFO) | Balance |
|---|---|---|---|
| 1 May | 300 @ £4 | 300 units, 1,200 | |
| 8 May | 200 @ £5 | 500 units, 2,200 | |
| 15 May | 200 @ £5 + 150 @ £4 = 1,600 | 150 units, 600 | |
| 22 May | 250 @ £6 | 400 units, 2,100 | |
| 29 May | 200 @ £6 = 1,200 | 200 units, 900 |
Perpetual LIFO
Periodic versus perpetual
- FIFO gives the same closing value under both systems: the closing units are always the latest ones bought.
- LIFO can differ: the periodic method assumes all issues happen at the end, so it can use batches that actually arrived after the issue.
- Perpetual records support control (inventory always known, theft spotted by comparing with physical counts) but take more effort, though software makes them easy.
Worked example
From the cards above, compare the closing inventory values.
- FIFO closing value: £1,200.
- LIFO closing value: £900.
- Prices rose during May, so FIFO leaves dearer units in inventory.
Answer: FIFO £1,200; perpetual LIFO £900.
Check yourself
- Receipts: 1 Sep 80 units at £20; 5 Sep 120 units at £22; 20 Sep 100 units at £25. Issues: 10 Sep 150 units; 25 Sep 60 units. Value closing inventory using perpetual FIFO.
Show answer
£2250. 90 units remain: the latest 90 at £25 = 2,250.
- Using the same data (80 at £20, 120 at £22, issue 150, 100 at £25, issue 60), value closing inventory using perpetual LIFO.
Show answer
£2000. 10 Sep issue: 120 at £22 and 30 at £20, leaving 50 at £20. 25 Sep issue: 60 at £25, leaving 50 at £20 and 40 at £25 = 2,000.
- Using perpetual LIFO on the same data, what is the total cost of the units issued?
Show answer
£4740. Total purchases 6,740 - closing 2,000 = 4,740.
- Using the same data, value closing inventory using periodic LIFO (90 units at the earliest prices).
Show answer
£1820. 80 at £20 and 10 at £22 = 1,820, different from perpetual LIFO.
- Which method always gives the same closing inventory value under periodic and perpetual systems?
- LIFO
- FIFO
- Neither of the two methods
- It depends on the selling price
Show answer
FIFO. The units left under FIFO are always the most recent purchases.
- Which is an advantage of a perpetual inventory system?
- No physical inventory count is ever needed
- It always gives a higher profit
- It is not affected by price changes
- Inventory levels and values are known at any time, helping control and reordering
Show answer
Inventory levels and values are known at any time, helping control and reordering. Continuous records support reordering and comparison with physical counts to detect losses.
Sources
Last updated 8 November 2026. Spotted a mistake? Tell us.