FIFO

An inventory accounting method that assumes the oldest goods purchased are sold first.

FIFO, First In First Out, assumes the oldest inventory a company holds is the first to be sold, so cost of goods sold reflects older, often cheaper, prices while the most recent purchases remain valued on the balance sheet. In periods of rising prices, FIFO tends to report higher profits than LIFO, since it matches cheaper, older costs against current revenue.

Under FIFO, the bakery accounted for its flour purchases in the order it bought them, oldest bags first.