LIFO (Last In, First Out)

Intermediate 💰 Finance / Accounting

Definition

An inventory accounting method where you assume the last units purchased are the first ones sold, useful for pretending inflation doesn't exist.

Example Usage

We switched to LIFO inventory accounting to match our cost of goods sold with current market prices.

Origin

Acronym coined for inventory management in the 1920s; became a tax strategy in the 1940s.

Fun Fact

LIFO is banned under IFRS (international standards) but allowed in the US, so American companies use it for tax benefits.

Source: Inventory Accounting Methods

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