fifo full form in accounting

  FIFO Full Form in Accounting: Meaning, Method & Example In accounting and inventory management, FIFO stands for "First-In, First-Out." It is one of the most commonly used methods to manage inventory and calculate the cost of goods sold (COGS). 🔍 What is FIFO? FIFO (First-In, First-Out) means that the goods or inventory items that are purchased or produced first are the first ones to be sold or used . It assumes that older inventory gets used up before newer inventory. 🧾 Why is FIFO Important in Accounting? FIFO is especially important in times of inflation . Since older, cheaper inventory is used first, the cost of goods sold is lower and the net profit is higher . This gives businesses a more favorable financial position on paper. 📦 How FIFO Works – Simple Example Let’s say a company buys 100 units of a product: Batch 1 : 50 units at ₹100 each Batch 2 : 50 units at ₹120 each Now, the company sells 60 units. Under FIFO , the first 50 units so...