What is cost flow assumption in SAP FI - Financial Accounting?

SAP Term: cost flow assumption

• Component: FI

• Component Name: Financial Accounting

• Description: Concept used to determine the current value of inventories, based on the moving average price and the following types of inventory movement: LIFO Last In First Out FO First In First Out

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• Key Concepts: 
  Cost flow assumption is a concept used in Financial Accounting (FI) in SAP. It is used to determine the cost of goods sold and the value of inventory on hand. It is based on the assumption that the cost of goods sold is equal to the cost of the most recently purchased or produced goods. 
  
  How to use it: 
  In SAP, cost flow assumption can be used to calculate the cost of goods sold and inventory value. This is done by taking the cost of the most recently purchased or produced goods and subtracting it from the total cost of all goods purchased or produced. The result is the cost of goods sold and the remaining amount is the value of inventory on hand. 
  
  Tips & Tricks: 
  When using cost flow assumption in SAP, it is important to ensure that all costs associated with purchasing or producing goods are included in the calculation. This includes any taxes, shipping costs, or other fees associated with the purchase or production of goods. 
  
  Related Information: 
  Cost flow assumption is closely related to other concepts such as inventory valuation methods and inventory accounting. It is important to understand these concepts in order to properly use cost flow assumption in SAP.