What is LIFO valuation procedure in SAP MM-IV - Invoice Verification?

SAP Term: LIFO valuation procedure

• Component: MM-IV

• Component Name: Invoice Verification

• Description: The separate valuation of the increase or decrease in the stock quantity of a material for different accounting periods for example, fiscal year or month. LIFO is the abbreviation of "last in, first out". The LIFO valuation procedure for stocks inventories is based on the assumption that the material acquired most recently is used or consumed first. When new stock is acquired or consumed, there is no change in the value of older stocks. As a result, price inflation cannot lead to an overvaluation of older stocks. Phantom illusory profits are thus avoided.

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• Key Concepts: 
  LIFO (Last In, First Out) valuation procedure is a method of inventory valuation used in SAP MM-IV Invoice Verification. It is based on the assumption that the last items to enter the inventory are the first ones to be sold. This method is used to determine the cost of goods sold and the value of the remaining inventory. 
  
  How to use it: 
  In SAP MM-IV Invoice Verification, LIFO valuation procedure is used to calculate the cost of goods sold and the value of the remaining inventory. The system will take into account the last items that were added to the inventory and assign them a higher cost than earlier items. This will result in a higher cost of goods sold and a lower value for the remaining inventory. 
  
  Tips & Tricks: 
  When using LIFO valuation procedure, it is important to keep track of when items were added to the inventory. This will ensure that the system assigns the correct cost to each item and that the cost of goods sold and remaining inventory values are accurate. 
  
  Related Information: 
  LIFO valuation procedure is just one of several methods used in SAP MM-IV Invoice Verification for calculating costs and values. Other methods include FIFO (First In, First Out) and Average Cost. It is important to understand how each method works in order to choose the best one for your business needs.