What is FIFO and Why It Matters in Inventory?

Inventory Costing Decoded

How do you calculate profit when you buy the same item at different prices throughout the year? First-In, First-Out (FIFO) assumes the oldest stock is sold first, providing a realistic cost of goods sold (COGS).

The Benefits of FIFO

• Tax Compliance: Preferred by tax authorities worldwide for its realistic margins.
• Prevents Expiry Losses: FEFO/FIFO naturally promotes selling oldest stock first.
• Accurate Asset Valuation: Keeps ending inventory valuation aligned with current market replacement costs.