Specific Identification Method of Inventory Accounting - Explained
What is the Specific Identification Method?
Written by J. Mance Gordon
Updated at April 7th, 2022
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
-
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
- Courses
Table of Contents
What is the Specific Identification Method?Example of the Specific Identification Method of Accounting for InventoryWhat is the Specific Identification Method?
The specific identification of inventory methods, or SI Method, is where we specifically identify which items of inventory has been sold. This means that we can expense the exact cost of the item being sold.
This method is usually only practical for businesses that have high price low turnover inventory.
As a sale occurs COGS or cost of goods sold is charged with the actual or invoice cost leaving the actual cost of inventory on hand still in the inventory account.
Example of the Specific Identification Method of Accounting for Inventory
Delta company is selling items of inventory that cost us 25 a piece to bring them in. We later bought a separate batch for 27 dollars a piece. Later, we bought another batch for 13 dollars each.
Delta company sold 29 units. 6 units came from the 1st batch at $25 each. 12 units came from the second batch at $27 each. 11 units came from the third batch. Because I know the specific units being sold, I can use the specific identification method.
I would multiple the units sold by the value and add them all together. This will give use our COGS. We can easily calculate the remaining value of inventory by subtracting this amount from the total value of inventory.
Related Topics
- Do It Right the First Time (DRIFT) Definition
- What is Merchandise Inventory (Retail Inventory Method)? – Financial Accounting
-
What are Inventory Costs (Carrying Costs)? – Financial Accounting
- Specific Identification Method of Accounting for Inventory – Financial Accounting
- First-in, First-Out Method (FIFO) – Financial Accounting
- Last-In, First-Out Method (LIFO) – Financial Accounting
- Weighted-Average Method of Accounting for Inventory – Financial Accounting
- Financial Statement Effects (Inflationary vs Deflationary Periods) – Financial Accounting
- Intermittent Purchase and Sell
- Choosing an Accounting Method – Financial Accounting
- Effect of Each Accounting Method on Taxes – Financial Accounting
- Lower of Cost or Market Method of Accounting for Inventory – Financial Accounting