The First-In First-Out (FIFO) method of inventory valuation accounting is based on the practice of having the sale or usage of goods follow FIFO is an inventory management method that follows the principle of “first in, first out.” As mentioned, this means that the oldest products in a warehouse are the first to be sold or used. FIFO method explained with detailed illustrative exampleABC Co. Ltd sells leather jackets. Due to the seasonal nature of the business, ABC Co sells its merchandise as soon as possible to avoid the risk of downward fluctuation in prices towards the end of the winter season. Which of the following methods is most suitable for the valuation of ABC Co’s inventories? FIFO Principle stands for “First In, First Out,” meaning that the first item that was stored in a warehouse or store will be the first item to be sold or used. This method is commonly used in inventory management to minimize the usage risk of outdated products and reduce waste.
