what is the fifo

What is FIFO stands for First In, First Out, which is an inventory management method that assumes that the oldest inventory items are sold or used first. Under FIFO, the first items purchased are the first ones to be sold, ensuring that inventory is rotated efficiently. This method is particularly useful in industries where products have a limited shelf life, such as food and pharmaceuticals, as it helps prevent the sale of expired goods. FIFO is also widely used in accounting to value inventory and calculate the cost of goods sold (COGS), ensuring that the cost of the oldest inventory is recognized first.