FIFO Method

The FIFO (First-In, First-Out) method is an accounting approach used to manage inventory. It assumes that the oldest items added to stock are sold or used first, while newer items remain in inventory. For example, in a grocery store, the first cartons of milk received are sold before the newer ones. This method helps ensure inventory freshness and simplifies record-keeping by matching the cost of older inventory with current sales, which is especially useful during inflation when costs tend to rise over time.