FIFO

(noun)

Method for for accounting for inventories. FIFO stands for first-in, first-out, and assumes that the oldest inventory items are recorded as sold first.

Related Terms

(noun)

FIFO is an acronym for First In, First Out, which is an abstraction related to ways of organizing and manipulation of data relative to time and prioritization. This expression describes the principle of a queue processing technique or servicing conflicting demands by ordering process by first-come first-served (FCFS) behaviour: where the persons leave the queue in the order they arrive, or waiting one's turn at a traffic control signal.

Related Terms

Examples of FIFO in the following topics:

  • Inventory Techniques

    • FIFO, LIFO, and average cost methods are accounting techniques used in managing inventory.
    • FIFO, LIFO, and average cost methods are accounting techniques used in managing inventory involving the amount of money a company has tied up within inventory of produced goods, raw materials, parts, components.
    • FIFO stands for first-in, first-out, meaning that the oldest inventory items are recorded as sold first but do not necessarily mean that the exact oldest physical object has been tracked and sold.
    • Since the 1970s, some U.S. companies shifted towards the use of LIFO, which reduces their income taxes in times of inflation, but with International Financial Reporting Standards banning the use of LIFO, more companies have gone back to FIFO.
    • The difference between the cost of an inventory calculated under the FIFO and LIFO methods is called the LIFO reserve.

  • Inventory Costs

    • Inventory costs depends on methods used, which include Specific Identification, Weighted Average Cost, Moving-Average Cost, FIFO, and LIFO.
    • FIFO stands for first-in, first-out, meaning that the oldest inventory items are recorded as sold first, but do not necessarily mean that the exact oldest physical object has been tracked and sold.
    • However, with International Financial Reporting Standards banning the use of LIFO, more companies have gone back to FIFO.
    • The difference between the cost of an inventory calculated under the FIFO and LIFO methods is called the LIFO reserve.

  • Limitations of the Income Statement

    • Income statements are a key component to valuation but have several limitations: items that might be relevant but cannot be reliably measured are not reported (such as brand loyalty); some figures depend on accounting methods used (for example, use of FIFO or LIFO accounting); and some numbers depend on judgments and estimates.
    • Another common difference across income statements is the method used to calculate inventory, either FIFO or LIFO.

  • Defining the Income Statement

    • Some numbers vary based on the accounting methods used (e.g. using FIFO or LIFO accounting to measure inventory level).