What is FIFO Accounting?
Answer:
One of the common methods for recording 
the value of inventory is called FIFO accounting. FIFO is an acronym for “first in – first out.” Utilizing this method of inventory, older merchandise would be shipped or sold before newer merchandise.

When restocking merchandise, perishable products, such as milk and eggs, are often restocked from the back. This FIFO restocking method assures that older items are pushed to the front of the store shelf where they are usually the first items selected by shoppers. FIFO accounting varies from LIFO (last in – first out) accounting. With LIFO the newest merchandise would be available to the consumer first. Depending on the item, it may be appropriate to utilize both FIFO and LIFO.

Whichever method of accounting you choose will effect your profit/loss statement. If you’re not sure whether you should use FIFO or LIFO accounting, contact your tax attorney or your accountant.
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