First In, First Out (FIFO)

By Entrepreneur Staff

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First In, First Out (FIFO) Definition:

An accounting system used to value inventory for tax purposes. Under FIFO, inventory is valued at its most recent cost.

FIFO was the traditional method used by most businesses before inflation became common. Under FIFO, the goods you receive first are the goods you sell first. Under this method, you value inventory at its most recent price. FIFO is usually used during periods of relatively low inflation since high inflation and increasing replacement costs tend to skew inventory accounting figures.

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Cash Flow Statement

A financial statement that reflects the inflow of revenue vs. the outflow of expenses resulting from operating, investing and financing activities during a specific time period

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