If you hold stock, the way you value it directly affects your cost of goods sold (COGS), your gross profit, and the inventory figure on your balance sheet. Two methods dominate: weighted-average cost (WAC) and first-in-first-out (FIFO).
Weighted-average cost (WAC)
WAC blends the cost of all units into a single running average. Buy 100 units at AED 10 and 100 at AED 12, and every unit is now valued at AED 11. It's simple, smooths out price swings, and is easy to audit.
First-in-first-out (FIFO)
FIFO assumes the oldest stock sells first. In a rising-price environment, COGS reflects older, cheaper costs — so reported profit (and closing inventory value) tends to be higher than under WAC.
Which should you choose?
- Choose WAC for simplicity and stable reporting when items are interchangeable.
- Choose FIFO when you track perishable or dated stock and want closing inventory at recent costs.
- Whichever you pick, apply it consistently — switching methods mid-stream distorts comparisons.
myInvoice.ae's inventory engine maintains WAC and FIFO cost layers per product and posts COGS straight to the ledger on every issue — so your stock value and your accounts never drift apart.