VCE Accounting inventory cards: FIFO and Identified Cost

The study design uses the perpetual inventory system with two cost methods: First In, First Out (FIFO) and Identified Cost. Every movement goes on the card at cost, and the card's balance is the cost of the inventory on hand.

Methods	FIFO and Identified Cost
System	Perpetual: every movement recorded as it happens
Valuation	The lower of cost and net realisable value
GST	Excluded on inventory used for advertising or drawn by the owner

The FIFO conventions

A sales return comes back at the cost of the last goods sent out, reversing that issue.
A purchase return leaves at the cost shown on its credit note.
A stock gain found at the count is recorded at the latest cost in; a stock loss at the oldest cost on hand.
Inventory drawn by the owner or used for advertising leaves at cost, with no GST.

Identified Cost

Each item carries its own cost, so a sale, return or loss uses the cost of the actual item, read from the count or the document.

Product and period costs

A cost of getting the goods ready for sale, such as freight in, is a product cost and goes on the card. A cost of selling them, such as freight out, is a period cost and goes to an expense.

Try 1 question

Question 1 · Short question · Inventory2 marks

Inventory

Kestrel Camping, owned by Daniel Ferreira, imports camping stoves to sell. Several costs were paid in March 2026.

Which of these costs is a product cost, recorded as part of the cost of the stoves on the inventory card? (2 marks)

Electricity for the showroomFreight paid to deliver the stoves from the shop to customers' homesAdvertising the stoves onlineInsurance on the stoves during shipping from the supplier

Next step

Take the free test Try the lesson on inventory

The VCAA's VCE Accounting study design page

Questions people ask

Which inventory methods does VCE Accounting use?

FIFO and Identified Cost, both on the perpetual system.

Is GST recorded when the owner takes inventory?

No. The study design excludes GST on inventory drawn by the owner and on inventory used for advertising.

When is inventory written down?

When its net realisable value falls below its cost: inventory is reported at the lower of cost and net realisable value.