Inventory Cost Method is an accounting practice used to track the cost of goods sold and calculate inventory turnover. It assigns a cost to newly acquired items, such as raw materials, and empties out stock when products are purchased or sold. This method is important for companies that need to maintain accurate records of their inventories and must accurately report their costs and sales. The procedure is slightly different depending on which method is being used—the Average Cost Method or the First-In First-Out (FIFO) Method —but in all cases, it helps businesses understand the value of their inventories so they can accurately reflect their financials.