Inventory costing: FIFO and weighted average
How cost layers work, how COGS is calculated, and how it posts to the ledger.
Cost layers and COGS
With FIFO, each receipt creates a cost layer. When you sell or remove stock, the oldest layers are consumed first and the cost of goods sold equals the cost of the consumed layers. With weighted average, a single running average cost is used instead.
On a sale, Valinor Ledger posts a debit to COGS and a credit to the inventory asset account for the consumed cost, automatically.