FIFO
First in, first out: the oldest stock is used or sold first.
What it means in business
FIFO is a stock handling rule and a way of valuing stock. As a handling rule it keeps goods from ageing or expiring. As a valuation method it treats the oldest purchase cost as the first to go into the cost of what is sold, so closing stock is valued at the latest prices.
Example
A distributor of packaged food ships the batch with the earliest expiry first, so no batch gets stuck at the back of the warehouse and expires. This is an illustration of normal business use rather than a quoted case study.
How to use it correctly
Store goods so the oldest can be picked first, record batch or receipt dates, and pick against them. Choose the valuation method with your accountant and apply it consistently.
Common confusion
FIFO is not the only valuation method: weighted average cost is also common in India, and the choice changes reported cost and profit when prices move. Using FIFO to pick does not force you to value stock by FIFO.
Related glossary terms
Written on 24 October 2026 for lamp. Confirm the current rules with the official source or an adviser before relying on it.