In terms of accounting, Specific identification means ?? How does it works ?

Answer 1

You're dealing with valuation methods of inventories. The common ones are Specific Identification, FIFO, LIFO and Weighted Average.

Specific Identification: This method requires the ability to identify each unit of inventory. The cost of goods sold is the cost of specific items of inventory sold. This method is appropriate when inventory is few in number, have individually high cost and can be specifically identified.

Specific identification - You actually value ending inventory at what each individual item cost. Used to be used only for large items. With bar-coding, now used more frequently.

Specific Identification Inventory Valuation Method -
A method of tracking inventory when each item can be identified. Specific identification is usually used for large, easily traceable items, such as vehicles or furniture.

To sum up, you use this method to value your inventory when the product is not mass produced and the cost of each piece of inventory is traceable. When you purchase your inventory, you have to mark each piece with a code or part no. so that you can track its purchase cost. Common e.g. are as stated above, vehicles, furniture, jewellery (in a jewellery shop), antiques, artworks (in an art gallery), parcels of land, buildings (for a property developer), etc.