FIFO stands for ‘First In, First Out’. It is an inventory management principle that is used to ensure that products are sold in the order in which they were received.
In practice, FIFO works like this: when a company receives a new supply of products, these are placed at the end of the inventory, after all products that have been received previously. When a customer orders a product, the company will take the oldest product, i.e. the one at the beginning of the inventory. In this way, the products remaining in the inventory will be the newest ones, waiting to be sold.
The FIFO method is particularly useful for companies that sell products with an expiry date, such as foodstuffs or medicines. In these cases, using the FIFO method avoids the risk of having to throw away expired products because they remain unsold. In addition, FIFO is also useful for companies that produce or sell products subject to rapid obsolescence, such as consumer electronics products.
FIFO is also used in various financial areas, such as accounting and inventory management, to ensure that costs are recorded in the order in which they were incurred. For example, if a company has purchased a product at a certain price, FIFO allows that price to be assigned to the products sold based on the order in
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