What is LIFO?
LIFO is an inventory management method standing for (Last In First Out). It is a way of determining which items of inventory have been sold during a period and which items remain in stock at the end of the period. This will allow a business to determine the cost of goods sold and the value of the closing inventory. A method is needed because all items are not purchased at the same price.
The LIFO method assumes that the goods most recently put into inventory are used first. The inventory purchased last (in) is sold first (out).
For further information on LIFO see the Wikipedia definition.
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About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.