First In First Out (Noun)
Meaning
Inventory accounting in which the oldest items (those first acquired) are assumed to be the first sold.
Classification
Nouns denoting acts or actions.
Examples
- The company used the first-in-first-out method to value its inventory, assuming that the oldest items were sold first.
- Under the first-in-first-out approach, the cost of the earliest acquired items is matched against the revenue generated from their sale.
- The accountant applied the first-in-first-out principle to determine the cost of goods sold and the ending inventory balance.
- The first-in-first-out method is often used in inventory accounting because it is simple to apply and closely approximates the physical flow of goods.
- By using the first-in-first-out method, the business was able to accurately report its cost of goods sold and maintain a realistic inventory valuation.