First In First Out (FIFO)

First In, First Out (FIFO) is an inventory management method where the oldest stock is used or sold first. Imagine a grocery store: products received earlier are sold before newer ones to prevent spoilage and ensure freshness. This approach helps maintain accurate inventory levels, reduces waste, and reflects the actual flow of goods. FIFO is widely used in accounting and inventory control to match costs with revenues accurately and to provide a realistic picture of a company's inventory value.