FIFO Method
Accounting glossary · Understand, connect, apply
FIFO, or first-in, first-out, assigns the costs of the earliest acquired units to goods sold first. Ending inventory therefore contains the more recent costs.
Example
A business buys ten units at $4 and ten at $6, then sells ten. Under FIFO, COGS is $40 and ending inventory is $60.
Remember the difference
FIFO is a cost-flow assumption and need not describe the exact physical movement of every unit.
Updated 3 November 2026. Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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