what is fifo method

what is fifo method is a business inventory management method where the first goods purchased or produced are the first to be sold or used. FIFO stands for “First In, First Out,” and it is commonly used in industries where products have a limited shelf life, such as food and pharmaceuticals. In the FIFO method, older inventory items are sold first, ensuring that stock doesn’t become obsolete or expired. This method helps maintain inventory value and can be beneficial for businesses that need to track the age of their products. FIFO is also useful for financial reporting, as it reflects more current costs in the balance sheet.