How do I calculate profit and loss (P/L), FIFO method?

How do I calculate profit and loss (P/L), FIFO method?  

The FIFO (First-In, First-Out) method assumes that securities acquired first in a portfolio or account are also the first to be sold. As a result, the earliest costs incurred are recognised first when calculating gains or losses.

In April, a further 10 units of stock XYZ are purchased at a price of GBP 20 and a commission of 2%. The total cost of the transaction is GBP 200 plus the GBP 4 commission. The costs incurred in Period 2:

At the end of November, 55 units of XYZ are sold at a price of GBP 15, the closing Transaction Value is determined first so as to calculate Realised P/L. And according to the assumptions of FIFO the units that were purchased first are sold off first. Therefore, the costs that were incurred first are recognised first in determining the Realised Position P/L. The total cost of the transaction is GBP 825 plus the GBP 16.50 commission. The income gained in Period 3:

The closed position is of 55 units, but only 50 units were bought in Period 1. To determine P/L using FIFO, the cost of the first 50 units of the closing position are recognised first:

The costs from Period 2 are recognised after all the costs from Period 1 have all been taken into account.

The Total Realised Position P/L is calculated as:

Determining PnL for Tax Reporting

The Closed Position Report provides an overview of portfolio performance within a given valuation period, calculating profit and loss (PnL) using FIFO (First-In, First-Out) principles. However, it’s important to note that FIFO may not align with the tax reporting methods used by local tax authorities.

Key Considerations

• The Closed Position Report is only an indicative measure of profit/loss during the period.

• Always verify the PnL calculation against individual trades recorded in the Trades Report to ensure accuracy.

• To comply with tax requirements, it’s advisable to consult a tax professional to confirm the correct PnL calculation method based on local regulations.

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