This video shows how to use the FIFO (first in, first out) cost flow assumption to calculate Cost of Goods Sold (COGS) and ending inventory for a company that uses a periodic inventory system.

Companies that use a periodic inventory system do not make changes to the inventory account when inventory is purchased or sold. Thus, a company using FIFO and a periodic system would wait until the end of the period before adjusting the inventory account or recording Cost of Goods Sold. At the end of the period, the first units purchased would be the first units to flow through Cost of Goods Sold on the Income Statement, whereas the remaining units would comprise the ending inventory on the Balance Sheet.