What is LIFO?

Definition: LIFO (Last In - First Out) is a method for inventory management and accounting where the most recently received or produced items are used or sold first. This means that the newest stock is processed before older inventory.

Where is LIFO Used?

This strategy involves the first stock removal of the most recently stored goods to ensure that the latest goods are always delivered. In most cases, LIFO is used for items that change little or have virtually no stock variation. The disadvantage is that older items remain in the warehouse for longer, resulting in costs for inefficiently used storage space.translator

What are the Disadvantages of LIFO?

LIFO can also affect financial reporting. In times of rising prices, the LIFO method often results in higher cost of goods sold and lower inventory values on the balance sheet compared to other methods like FIFO (First In - First Out). This can impact profitability and tax calculations.