Maximizing Accuracy: The Benefits of Using the Specific Identification Method for Inventory Tracking in Social Sciences

specific identification method

An actual physical-flow costing method in which particular items sold and items still in inventory are specifically costed to arrive at cost of goods sold and ending inventory.

The specific identification method is an accounting technique used to track the cost of specific inventory items. Under this method, each item in inventory is assigned a unique identification number, and the cost of that item is recorded individually. When items are sold or otherwise disposed of, the specific identification method allows the business to easily determine the cost of those items and calculate the profit or loss on the sale.

For example, let’s say a grocery store has 10 identical boxes of cereal in inventory, each purchased at a different price. Under the specific identification method, each box of cereal would be assigned a unique identification number, and the cost of each cereal box would be recorded in the inventory records. If the store sells three boxes of cereal, the cost of those specific boxes sold would be removed from the inventory records, and the remaining cost of the remaining cereal boxes would still be recorded in the inventory records.

The specific identification method is often used by businesses that have high-value, low-volume inventory items, or items that have unique identification numbers, such as serial numbers. This method allows businesses to have a more accurate picture of their inventory costs and enables them to make informed decisions about pricing, ordering new inventory, or identifying theft or loss. However, the specific identification method can be more time-consuming and costly to implement than other inventory costing methods.

More Answers: