Question

What does FIFO refer to?

a. rotating stock so that the first one purchased is used first
b. rotation stock so that the first one used is the most recently purchased
c. rotating stock so that the last one purchased is used first
d. all of the above

Answer 1

FIFO refers to First-In-First-Out. It is a method of rotating stock so that the first one purchased is used first. Therefore the correct answer is option a.

Step-by-step explanation:

FIFO stands for “first-in, first-out” and is a method used in inventory management and accounting. FIFO refers to a. rotating stock so that the first one purchased is used first. This method assumes that inventory items are sold or used in the same order in which they are acquired, and it has implications for financial reporting and tax calculations.

Under the FIFO method, the cost of goods sold (COGS) is based on the cost of the oldest items in inventory, which can be beneficial during periods of rising prices as it typically results in lower COGS and higher reported profits.