what is first in first out

what is first in first out (FIFO) is an inventory management method where the first items placed into inventory are the first ones sold or used. This method is commonly used in industries dealing with perishable goods or time-sensitive products, ensuring that older stock is used before newer stock. FIFO helps reduce the risk of items becoming obsolete or expired while keeping the inventory system organized. In FIFO, the cost of goods sold is calculated based on the oldest inventory, which can also have tax implications in some cases. For businesses, implementing FIFO can result in more accurate financial reporting and better control over stock rotation.