Methods of Costing Inventory is a business term that refers to the various processes used to account for and track the cost of inventory. These methods vary depending on the type of inventory being tracked, but include methods such as first-in-first-out (FIFO), last-in-first-out (LIFO), and weighted average cost (WAC). Each method has its own advantages and disadvantages, so it’s important to weigh your options carefully when selecting the best approach for your business. With the proper accounting measures in place, tracking inventory costs doesn’t have to be a hassle – it can actually help streamline your operations and reduce costs.