FIFO: definition and use in a computer club

Published: 2026-05-31· IZI Team

FIFO — what it is and how it applies to club inventory accounting

FIFO (from “first in, first out”) — an inventory accounting method in which the cost of goods written off is taken from the earliest received batch. Applied in the bar and warehouse accounting of a computer club to calculate margin correctly.

Definition

FIFO is one of two common methods for valuing written-off inventory (the other is LIFO, last in first out). The difference matters when the same item is purchased multiple times at different prices.

FIFO principle: when goods are sold or written off, their cost is determined by the price of the earliest unused batch.

Example: the club bought 20 cans of soda in January at price P₁ and another 30 cans in February at price P₂ (P₂ > P₁ — prices rose). In March, 25 cans were sold. Under FIFO:

Cost of goods sold = 20 cans × P₁ + 5 cans × P₂

Remaining stock = 25 cans, valued at P₂.

Under LIFO it would be the reverse: the P₂ cans are written off first, then P₁.

Where it is used in IZI

In IZI, FIFO is applied in the Warehouse and bar module for all stock write-offs:

Bar sales — every can, snack, or coffee sold is written off at its FIFO batch cost
Write-off by act — manual write-offs (spoilage, loss) also take cost from early batches
Inventory — discrepancies are calculated using FIFO-valued stock balances

Practical implication: when working with IZI it is important to enter purchase invoices with actual costs. If an invoice is entered with an error or omitted, the FIFO calculation will produce incorrect cost and distort bar margin.

How FIFO affects margin calculation

Margin per item is calculated as:

Margin = selling price − FIFO cost

When purchase prices are stable, FIFO and LIFO give the same result. When prices are rising:

FIFO yields lower cost (older, cheaper batches) → higher reported margin
LIFO yields higher cost → lower reported margin

IZI uses FIFO as the most widely adopted standard in retail accounting.

Why this matters for the club owner

Without correct batch tracking, the club cannot see the real bar margin. If a purchase price has increased but the records have not been updated, the system shows the “old” margin, and the owner makes pricing decisions based on stale data.

Rule for correct FIFO in IZI: every new batch of goods is entered via a purchase invoice with the current cost immediately upon receipt, before any sales from that batch begin.

Warehouse in IZI — how to manage inventory
Bar in IZI — how bar sales connect to warehouse stock
AOV — bar margin also affects average check
Shift — bar sales and write-offs are recorded in the shift report

FAQ

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Frequently asked questions

What is FIFO in inventory accounting?

FIFO (first in, first out) — an accounting method in which the cost of goods written off is taken from the earliest received batch. If you bought 10 cans at price A and then 10 more at price B, the first 10 sold are written off at price A.

Why does a computer club need FIFO?

In a club with a bar, FIFO ensures the correct calculation of cost of goods sold. Without it, when purchase prices change, the margin on bar items is calculated incorrectly — distorting bar profitability and the overall financial picture.

How does FIFO work in IZI?

IZI automatically applies FIFO when writing off goods from the warehouse: when an item is sold, the system takes the cost from the earliest unused batch of that product.

How does FIFO differ from LIFO?

LIFO (last in, first out) is the reverse method: the last batch received is written off first. When purchase prices are rising, LIFO yields higher cost of goods and lower reported profit. FIFO under the same conditions gives lower cost and higher reported profit.

Does FIFO affect the selling price of goods?

No. FIFO only affects the calculated cost and margin. The selling price to the customer does not depend on the accounting method.