First In First Out - What is meant by First In First Out?

Q: What is meant by First In First Out?

First In, First Out, commonly known as FIFO, is an asset-management and valuation method in which assets produced or acquired first are sold, used, or disposed of first. For tax purposes, FIFO assumes that assets with the oldest costs are included in the income statement's cost of goods sold (COGS).

Answer

The FIFO principle states that assets should be sold, utilized, or disposed of in the order in which they were generated or obtained. This strategy is often employed in asset management and valuation. The FIFO method is used for tax reasons to determine the cost of goods sold (COGS) in the income statement by include the assets with the oldest costs.

First In First Out - What is meant by First In First Out?

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