What happens to costing history in an Adjust inventory worksheet using FIFO or LIFO?

In an Adjust Inventory worksheet, when FIFO (First In, First Out) or LIFO (Last In, First Out) costing methods are applied, the costing history is reset to average, meaning that historical cost data is no longer available for future reference. This process effectively simplifies inventory valuation and prevents complications that could arise from maintaining detailed historical records of individual transactions under these specific costing methods.

When you adjust inventory using these methods, the system calculates a new average cost based on current inventory levels, which overrides previously recorded cost histories. As a result, any existing cost history tied to FIFO or LIFO methodologies is lost, leading to an average cost being established for items in stock going forward. This approach benefits businesses by providing a streamlined basis for inventory valuation and eliminating the potential clutter from complex historical costing.