FIFO most commonly refers to “First In, First Out” , a principle where the first items that enter a system are also the first ones to leave it, especially in inventory and accounting contexts.

Core meaning

  • In business and accounting, FIFO is a method that assumes the oldest inventory (the first bought or produced) is the first to be sold or used.
  • This means older costs are recorded as cost of goods sold, and newer costs stay in ending inventory on the balance sheet.

Where FIFO is used

  • Inventory management & retail: Grocery stores, warehouses, and restaurants use FIFO so older stock is sold or used before newer deliveries, reducing spoilage and waste.
  • Financial reporting : FIFO is a standard inventory valuation method under many accounting frameworks (like IFRS), so companies use it to value stock and calculate profit and taxes.

Why FIFO matters

  • Helps keep products fresh and lowers risk of obsolescence or expired goods.
  • Often shows higher reported profits during inflation, because cheaper, older inventory is expensed first while newer, higher-cost inventory remains on the books.

TL;DR: When someone asks “what does FIFO refer to,” they almost always mean the First In, First Out method for moving or valuing items so the oldest ones are used or sold first.

Information gathered from public forums or data available on the internet and portrayed here.