FIFO (First In, First Out)

Definition

An inventory accounting method where you assume the first units purchased are the first ones sold, because apparently time works the way you learned it in kindergarten.

Example Usage

Under FIFO, that warehouse of peaches from January 1st gets sold before the ones that arrived in February.

Origin

Acronym from supply chain management; standard method for fresh goods accounting.

Fun Fact

FIFO produces higher reported profits in inflationary environments, so accountants love it until the tax bill arrives.

Source: Inventory Accounting Methods

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