FIFO (First In First Out)

FIFO stands for First in First out. It is a method of keeping count of the value of the inventory held by a company or organization and stands that the inventory that was added first to the stock will also be removed from the stock first.

Benefits of FIFO:

• FIFO is the most used method worldwide.
• Financial and income statements are harder to manipulate under the FIFO method.
• Cost flow layers are simple.
• More accurate match of inventory cost to current market value and gives a truer idea of inventory value and replacement costs.
• FIFO fosters a higher gross income as the cost of goods sold is usually lower.
• Easy to create a more intuitive flow of goods.