Accounting for material

Key methods for accounting for materials include:

• Perpetual Inventory System: Records each purchase and sale (or issuance to production) of inventory in real-time. This provides up-to-date inventory balances.
• Periodic Inventory System: Inventory is counted and recorded at the end of an accounting period. Purchases are recorded in a purchases account, and the cost of goods sold is calculated at the end of the period.

Common costing methods for materials include:

• First-In, First-Out (FIFO): Assumes the first units purchased are the first ones used in production.
• Last-In, First-Out (LIFO): Assumes the last units purchased are the first ones used in production. (Note: LIFO is not permitted under IFRS).
• Weighted-Average Cost: Calculates an average cost for all inventory items and uses this average to cost materials issued.