What is specific identification method for inventory costing?

The specific identification inventory valuation method is a system for tracking every single item in an inventory individually from the time it enters the inventory until the time it leaves it.

What is meant by specific identification method?

Definition: The specific identification method, also called specific invoice inventory pricing, is a technique used to assign cost to identifiable inventory. In other words, this is a way to value inventory by allocating costs to individual goods when they are purchased and received.

How do you do specific identification method?

To calculate ending inventory with the specific identification method, you track the exact purchase price and other costs related to individual items. The total cost of the inventory items at the end of the accounting period gives you the total ending inventory cost.

Is FIFO a specific identification method?

A specific identification inventory system treats each item individually, giving it a distinct value that it tracks from start to finish. A first-in, first-out, or FIFO, system treats individual items as interchangeable, but assigns them a bookkeeping value on their way out the door.

Is specific identification method GAAP?

Key concepts in this reading are as follows: Inventories are a major factor in the analysis of merchandising and manufacturing companies. Such companies generate their sales and profits through inventory transactions on a regular basis.

Which is the reason why the specific identification method may be considered ideal?

The specific identification method introduces a high degree of accuracy to the cost of inventory, since the exact cost at which something was purchased can be recorded in the inventory records, and charged to the cost of goods sold when the related item is sold.

What is standard inventory costing?

What is Standard Costing? The Standard Costing method does not use historical cost to build inventory value or determine cost of goods sold, but instead involves assigning “set”, predetermined costs to your inventory items for valuation.

What is difference between FIFO and specific identification?

FIFO (first in, first out) is the default method used when selling securities by brokerages, the IRS and GainsKeeper. FIFO sells your oldest lots first. The Specific ID method allows you to specify which shares you are selling. You will then be able to specify the shares you are selling.

What is a disadvantage of the specific identification method?

The main advantage of this method is that, flow of cost corresponds to the physical flow of inventory. In other words, actual costs are matched against revenues. The main disadvantage of using specific identification method is that, the net income can be easily manipulated under this method.

What kind of companies use specific identification method?

Some types of businesses that use the specific identification method are car dealerships, jewelry stores, art galleries and furniture stores.

Which company uses specific identification method?