what are different accounting methods for cogs 
the value of the cost of goods sold depends on the inventory valuation method adopted by a company there are three methods that a company can use when recording the level of inventory sold during a period first in first out fifo last in first out lifo and the average cost method the special identification method is used for high ticket or unique items 3the earliest goods to be purchased or manufactured are sold first since prices tend to go up over time a company that uses the fifo method will sell its least expensive products first which translates to a lower cogs than the cogs recorded under lifo hence the net income using the fifo method increases over time lifo is where the latest goods added to the inventory are sold first during periods of rising prices goods with higher costs are sold first leading to a higher cogs amount over time the net income tends to decrease the average price of all the goods in stock regardless of purchase date is used to value the goods sold taking the average product cost over a time period has a smoothing effect that prevents cogs from being highly impacted by the extreme costs of one or more acquisitions or purchases the special identification method uses the specific cost of each unit of merchandise also called inventory or goods to calculate the ending inventory and cogs for each period in this method a business knows precisely which item was sold and the exact cost further this method is typically used in industries that sell unique items like cars real estate and rare and precious jewels 