Specific Identification
Specific identification is the easiest system to understand. It can be used in any industry where the goods involved are a few high-priced items that are distinguishable from one another. A good example is the automobile industry. Each car has a vehicle identification number (VIN), so tracking which car was sold is relatively easy. Even though our paper clips have a bar code, every similar box of paper clips has the same bar code. With the VIN, only one car has that exact number.
When we sell the car, we can match the VIN with our records to determine what we paid for the car. That is the amount that is transferred from Inventory to Cost of goods sold.
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