Last-In-First-Out (LIFO)

Last-In-First-Out (LIFO) is an inventory management method where the most recently added items are sold or used first. Imagine a stack of plates: the newest plate is on top and removed first. This approach is common in accounting for inventory, especially when prices are rising, since it matches recent costs to sales. LIFO helps businesses manage inventory costs and taxes, but it can result in older stock remaining unsold. In essence, LIFO prioritizes using the latest acquired products before older stock, reflecting a "last in, first out" principle.