What is Cost Flow in Accounting

You can easily understand cash flow in accounting because it is just payment and receipt of cash. Your company's cash book or your bank statement is one of its best examples. You would also see the cash flow statement of a company's published financial reports. All are easy to understand but cost flow in accounting is just different from this. Cost flow means flow of cost of inventory before its real sale. Every year, we purchase lots of goods at different time and at different rates. Every time, when we issue the stock, we have to follow our inventory policy for inventory valuation. So, our cost flow is affected with our inventory policy. Suppose, our inventory purchase prices are increasing upward, at that time, if we use FIFO, it means we are issuing stock first in first out method. At this method, our closing stock’s cost flow will be last rates. But cost flow of closing stock in LIFO will be just opposite of FIFO. If prices of inventory are increasing, this method will not show current cash flow in closing stock.

More Resources 

Economic Order Quantity
Economic Order Quantity PPT
Control Ratio
Average Cost Method
Simple Average Method
Weighted Average Method
Scrap in Inventory