1. What is the Specific Identification Method?

The Specific Identification Method is an inventory costing method where each item in inventory is specifically identified and its actual cost is tracked. This method is typically used for high-value items with unique characteristics.

2. How Does the Calculator Work?

The calculator uses the specific identification formula:

Where:

• \( Specific\ Costs \) — The actual costs of individual items

Explanation: The method simply sums the actual costs of all specifically identified items to determine the total cost.

3. Importance of Specific Identification

Details: This method provides the most accurate matching of costs with revenues and is particularly useful for businesses dealing with unique, high-value items such as automobiles, jewelry, or real estate.

4. Using the Calculator

Tips: Enter the specific costs of items as comma-separated values (e.g., 100, 150, 200). The calculator will sum all values to provide the total cost.

5. Frequently Asked Questions (FAQ)

Q1: When is the specific identification method most appropriate?
A: This method is best suited for businesses that sell unique, high-value items where each item can be specifically identified and tracked.

Q2: What are the advantages of this method?
A: It provides precise cost matching, accurate inventory valuation, and exact calculation of cost of goods sold.

Q3: What are the limitations of specific identification?
A: It requires detailed record-keeping, is impractical for large volumes of similar items, and may allow for income manipulation.

Q4: How does this differ from FIFO or LIFO?
A: Unlike FIFO/LIFO which use assumptions about cost flow, specific identification uses the actual cost of each specific item sold.

Q5: Is this method acceptable under GAAP and IFRS?
A: Yes, both GAAP and IFRS allow the specific identification method when it's practical to use.