Here is how the Price Difference Account works for both AVCO and FIFO costing methods in Odoo:

The Price Difference account captures the difference between the cost of a product at the time it was received into stock versus the price on the vendor bill when the invoice is validated.

With AVCO (Average Cost) Costing Method:

When you receive goods, Odoo values stock at the average cost. When you later validate the vendor bill at a different price, the difference is posted to the Price Difference account. Odoo also updates the product average cost for remaining stock on hand. So the Stock Valuation Account is adjusted AND Price Difference captures any unbuffered variance.

With FIFO (First In, First Out) Costing Method:

FIFO is real-cost based. Each lot/batch is valued at what it was actually purchased for. When the vendor bill differs from the PO price at receipt, the difference goes to the Price Difference account. Unlike AVCO, FIFO does not retroactively adjust the remaining stock average cost. If goods have already been consumed (moved out of stock), the full variance goes to Price Difference. If goods are still in stock, Odoo will try to adjust the stock valuation layer first.

Where to configure this:

Go to Accounting > Configuration > Accounts and set the Price Difference account, or set it per product category under Inventory > Configuration > Product Categories > Account Properties > Price Difference Account.

Key Takeaway:

Both AVCO and FIFO use the Price Difference account to handle purchase price variances, but the behavior differs: AVCO updates the running average cost for remaining stock, while FIFO updates the specific stock valuation layer (if stock is still on hand) or expenses the difference immediately if stock is already consumed.