Last In First Out (Noun)
Meaning
Inventory accounting in which the most recently acquired items are assumed to be the first sold.
Classification
Nouns denoting acts or actions.
Examples
- Last-in-first-out is an accounting method where the most recently acquired items are assumed to be sold first to calculate the cost of goods sold.
- In last-in-first-out, the cost of the most recent inventory items purchased is matched against current revenues to determine the profit for the period.
- Using last-in-first-out accounting, the company would record a higher cost of goods sold due to the higher prices of the more recent inventory purchases.
- Under the last-in-first-out method, the ending inventory is valued at the cost of the earliest items purchased.
- The last-in-first-out method provides an advantage in terms of reducing taxes for companies that have experienced rising prices for their inventory items.