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Simple English definitions for legal terms
LIFO
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A quick definition of LIFO:
Term: LIFO
Definition: LIFO stands for Last In, First Out. This means that when you have a bunch of things to count or process, you start with the newest thing first and work your way backwards. So, the last thing that came in is the first thing to be dealt with. This is often used in accounting, which is a way of keeping track of money and expenses.
A more thorough explanation:
Definition: LIFO stands for Last In, First Out. It is a method used to process items in which the newest item is counted or processed first, and each older item is processed in reverse chronological order after that. This method is commonly used in inventory management and accounting.
- A stack of plates in a restaurant kitchen is a good example of LIFO. The newest plate is placed on top of the stack, and when a plate is needed, the top plate is taken first, leaving the older plates at the bottom of the stack.
- In accounting, LIFO is used to value inventory. When a company sells a product, it is assumed that the newest inventory is sold first, and the cost of goods sold is calculated accordingly.
The examples illustrate the LIFO method by showing how the newest item is processed or used first, and the older items are used or processed later. This method can be useful in situations where it is important to keep track of the order in which items are received or used.