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Simple English definitions for legal terms
first-in, first-out
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A quick definition of first-in, first-out:
Term: FIRST-IN, FIRST-OUT
Definition: FIRST-IN, FIRST-OUT is a way of keeping track of things that assumes the first thing you put in is the first thing you take out. It's like a line at the store, where the first person in line gets helped first. In accounting, it means that the oldest items are sold or used first before newer ones. This is abbreviated as FIFO. It's the opposite of LAST-IN, FIRST-OUT, which means the newest items are used or sold first.
A more thorough explanation:
Definition: First-in, first-out (FIFO) is an accounting method that assumes that goods are sold in the order in which they were purchased. This means that the oldest items are sold first.
Example: Let's say a grocery store buys 100 cans of soup on January 1st and another 100 cans on February 1st. If the store sells 50 cans of soup on March 1st, FIFO assumes that the store sold the 50 cans of soup that were purchased on January 1st first, before selling any of the cans purchased on February 1st.
This method is commonly used in inventory management and accounting to ensure that older items are sold before newer items. It can also help businesses avoid losses due to expired or outdated products.