Question

What is the difference between first-in, first-out (FIFO) and last-in, first-out (LIFO)?

Answer 1

FIFO stands for First-In, First-Out, which means that the first product that enters your inventory is also the first one to leave. LIFO stands for Last-In, First-Out, which means that the last product that enters your inventory is also the first one to leave. While FIFO is better for perishable goods, LIFO is better for long-term holding goods that may increase in value over time.

Answer 2

FIFO and LIFO are inventory management methods used to track the cost of goods sold and inventory levels.

FIFO assumes that the first items purchased are the first sold, while LIFO assumes that the last items purchased are the first sold.

In times of rising prices, LIFO results in higher cost of goods sold, lower reported income, and lower taxes, while FIFO has the opposite effect.

In times of falling prices, the results are reversed, with FIFO resulting in higher cost of goods sold and lower income, and LIFO having the opposite effect.

Answer 3

First-in, first-out (FIFO) and last-in, first-out (LIFO) are inventory valuation methods. FIFO assumes that the first items purchased are the first sold, while LIFO assumes the last items purchased are the first sold, impacting the cost of goods sold and inventory valuation.