First in, first out (FIFO) accounting is a method for assessing the value of inventory, in which the first purchased items are assumed to be the first ones sold or disposed of. FIFO accounting typically increases the recorded value of inventory and results in a higher net income than if LIFO were used. FIFO may lead to higher income taxes, but also helps new businesses get loans on better terms.
See LIFO accounting (contrast).
[Last updated in December of 2022 by the Wex Definitions Team]