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The majority of companies monitor their inventory levels. Much fewer monitor what it truly cost them, causing that disparity to subtly skew every profit number, tax calculation, and buying choice they face.

For those selling physical products, the sequence in which you manage inventory costs affects your reported earnings, tax obligations, and the asset value on your balance sheet. Two companies with the same inventory and sales can show entirely different gross margins, solely because one adopts FIFO while the other employs LIFO. 

That is not a loophole. It involves inventory valuation, and it is among the most significant accounting choices a product-oriented company can take.

GearChain has now added a free FIFO/LIFO Inventory Valuation Template to its library of free spreadsheet templates, available for both Google Sheets and Excel, so any business can apply the right costing method without needing accounting software or a finance degree.

What FIFO and LIFO Actually Mean

FIFO (First-In, First-Out) presumes that the initial units in your stock are the first to be sold. When you record a sale, the cost assigned to it comes from your earliest purchase batch. The inventory remaining on your books reflects your most recent, typically higher, purchase prices.

LIFO (Last-In, First-Out) assumes the opposite: the most recently purchased units are sold first. Each sale is costed at your newest purchase price. The inventory left on your books carries the oldest, typically lower, costs.

The physical movement of goods does not have to match either assumption. These are accounting conventions, not warehouse instructions.

Why the Difference Matters

In an environment of increasing prices, which characterizes the majority of supply chains most of the time, the two approaches yield significantly different outcomes:

FIFO tends to produce a cleaner balance sheet and is required under IFRS. LIFO is only permitted under US GAAP, but it is widely used by US businesses specifically because higher COGS reduces taxable income in periods of rising costs.

Both approaches are not universally "correct." The appropriate decision relies on your sector, your legal region, your reporting requirements, and your tax approach.

What the Template Does

The FIFO/LIFO Inventory Valuation Template handles the layer-by-layer cost tracking that makes these methods tedious to calculate manually. You enter your transactions once, and the template does the rest.

One Transaction Sheet, All Items

Every purchase and sale for every product goes into a single Transactions sheet. Every line records the date, product name, SKU, type of transaction (opening stock, purchase, or sale), quantity, cost per unit, and selling price. There is no need to maintain separate logs per product.

Automatic Per-Item Valuations

The template separates each item's transaction history and applies FIFO and LIFO layer logic independently. For every sale, it identifies which purchase batches are consumed first, oldest batches under FIFO and newest batches under LIFO, and calculates the exact COGS for that transaction.

Live Formulas Throughout

The majority of the template is built on live spreadsheet formulas. Change a unit cost in the Transactions sheet and the totals, summaries, and comparison figures update automatically. Key formula types used include:

• IF and OR for conditional cost and revenue calculations

• SUMIFS for per-item aggregation across a shared transaction log

• Cross-sheet references (='Sheet Name'!Cell) to pull data from Transactions into valuation sheets

• Running SUM with anchored row references for cumulative COGS totals

Eight Sheets, One Complete Picture

Who Should Use This Template

This template is created for individuals who need to grasp the actual expense of their inventory, not solely the amount.

Finance and accounting groups working on period-end reports, reconciling COGS, or providing audit documentation will find the detailed layer sheets especially beneficial. 

Small and mid-sized product businesses that have outgrown simple stock trackers but are not yet running dedicated ERP or accounting software can use this template to produce defensible COGS figures for their income statements.

Manufacturers and distributors managing raw materials or finished goods across multiple SKUs can use the multi-item structure to track cost layers for each product independently within a single workbook.

US-based businesses evaluating LIFO for tax purposes can use the Comparison sheet to model the tax impact before committing to a costing method.

Students and finance professionals learning inventory accounting will find the Formula Guide and detail sheets a practical, worked example of how FIFO and LIFO layer consumption actually operates.

A Note on LIFO and IFRS

If your business reports under International Financial Reporting Standards, LIFO is not an option. IAS 2 explicitly prohibits it. The template includes this warning throughout and is structured so that IFRS-reporting businesses can simply use the FIFO sheets and ignore the LIFO columns.

If you report under US GAAP and are considering LIFO for tax purposes, consult a qualified accountant before changing your costing method. Switching to LIFO requires a formal election with the IRS and has long-term implications for your financial statements.

Download the Template

The FIFO/LIFO Inventory Valuation Template is now listed as #11 in GearChain's free template library. It is offered in both Google Sheets and Excel formats, prepared for you to copy and modify for your personal inventory.

The template has been incorporated directly into the collection, as you can see. Select the link for your desired format below, download it, and modify it to suit your company's products, SKUs, and cost requirements. 

Google Sheets version: Free Google Sheets Inventory Templates - #11 FIFO/LIFO

Excel version: Free Excel Inventory Templates - #11 FIFO/LIFO

Each version contains the identical eight-sheet layout, example data for three products, active formulas, and the complete Formula Guide. The Google Sheets version supports FILTER, UNIQUE, and QUERY functions for dynamic item filtering. The Excel version is fully compatible with Microsoft Excel 2016 and later.

When You Outgrow the Spreadsheet

A spreadsheet template is the right starting point for most businesses. It is free, flexible, and fast to set up. But as transaction volume grows, as more team members need access, and as inventory moves across multiple locations, manual spreadsheet management becomes a bottleneck.

GearChain is built for that next step: real-time inventory tracking, barcode and QR scanning, spreadsheet sync, multi-user collaboration, and advanced reporting, without the complexity of a full ERP system.

Start with the free template today. When your inventory operations need more speed, accuracy, and automation, GearChain is ready.

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