LIFO

LIFO, which stands for "Last In, First Out," is an inventory and accounting method where the most recently added items are sold or used first. Imagine stacking boxes on top of each other; under LIFO, you remove the top boxes first. This approach helps businesses account for changes in product costs, especially when prices are rising, because it assigns the newest, higher-cost items to cost of goods sold, possibly leading to different profit and tax outcomes compared to other methods. LIFO is commonly used in industries with fluctuating prices to better match costs with revenues.