FIFO or First In First Out

FIFO or First In First Out A method of inventory valuation in which the cost of first items received in the inventory is taken into the cost of the first items sold. Under this method the cost of goods sold equals the opening inventory plus purchases during the year, less closing inventory. Since in an inflationary situation the first costs of the inventory are lower than the last costs, the cost of goods sold figure will be lower, showing a higher value of the closing in inventory and higher gross profits. See LIFO.

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