What are FIFO (First-In, First-Out) and LIFO (Last-In, First-Out) methods in inventory management?

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Accepted Answer

FIFO and LIFO are inventory management methods used to track the flow of goods in and out of a store.

FIFO (First-In, First-Out) method assumes that the oldest inventory items are sold first, so the goods that were purchased first are also the first to be used or sold.
LIFO (Last-In, First-Out) method assumes that the newest inventory items are sold first, so the goods that were purchased last are the first to be used or sold.
FIFO is commonly used in industries where products have a limited shelf life, such as food and beverages.
LIFO is often used in industries where the cost of inventory is rising, as it can help reduce taxable income by matching high-cost items with revenue.
Both methods have their own advantages and disadvantages, and the choice between them can have significant financial implications for a business.

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