Accounting Dictionary - Accounting Terms
First In First Out
One more of accounting terms - First In First Out Method is a method to value inventory. Application of this method is based on the assumption that first those inventory items which were acquired at the earliest are being sold and their cost is included into the Cost of Goods Sold.
Note, that this is an assumption for the accounting purposes, so this does not mean that physically entity must sell the oldest items first. However for the purpose of Cost of Goods Sold calculation this assumption is used.
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