Inventory Cost Flow Methods are the various ways in which businesses track, manage, and account for their inventory-related expenses. By applying this approach, companies can allocate costs of goods sold (COGS) accurately and consistently. This helps to ensure that accurate financial records are being kept, while also providing valuable information to inform decision-making. At its core, the basic logic behind inventory cost flow methods involves the following steps: assigning purchase costs to inventory items; tracking those costs as the inventory is sold or transferred; and calculating COGS accordingly. Accounting standards must be followed when employing one of these methods to keep accurate records. While it may be difficult to keep up with all of the regulations and terminology involved, understanding how inventory cost flow methods work can help businesses remain profitable, efficient, and compliant with relevant authorities.