First In, First Out (FIFO)

First In, First Out (FIFO) is a method used for the purposes of cash flow assumptions. It is a method based assuming that the sale of products follows the exact order in which they were purchased or manufactured.

In the FIFO method, it is assumed that the sale of products follows the exact order in which they were purchased or manufactured. That is, the oldest products are recorded as sold first irrespective of whether it is actually done this way.

The cost recorded for the initial purchase of the product will be used in calculations.