First In, First Out (FIFO)

By Entrepreneur Staff

Pencil

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.

More from Accounting

Cash Flow

The difference between the available cash at the beginning of an accounting period and that at the end of the period. Cash comes in from sales, loan proceeds, investments and the sale of assets and goes out to pay for operating and direct expenses, principal debt service, and the purchase of asset

See full definition

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

See full definition

Cash-Basis Accounting

An accounting system that doesn't record accruals but instead recognizes income (or revenue) only when payment is received and expenses only when payment is made. There's no match of revenue against expenses in a fixed accounting period, so comparisons of previous periods aren't possible.

See full definition

Accountant

A person whose work it is to inspect, keep or adjust accounts

See full definition

Latest Articles

Business Solutions

Increase Productivity with This Microsoft 365 Subscription, Now $25 Off

It can make the entrepreneur life a lot easier.

Business News

Apple Pay Later Is Ending. Here's What's Taking Its Place.

The program was available for less than a year.

Leadership

This Artist Answered a Businessman's 'Powerful' Question — Then His Work Became 'the Poster Child for Juneteenth': 'Your Network Really Becomes Your Net Worth'

Reginald Adams was the executive director of a Houston-based art museum for more than a decade before he decided to launch his own public art and design firm.