{"id":7394,"date":"2024-09-23T15:07:43","date_gmt":"2024-09-23T15:07:43","guid":{"rendered":"https:\/\/paybis.com\/blog\/?post_type=glossary&p=7394"},"modified":"2024-09-23T15:07:43","modified_gmt":"2024-09-23T15:07:43","slug":"fifo-first-in-first-out","status":"publish","type":"glossary","link":"https:\/\/paybis.com\/blog\/glossary\/fifo-first-in-first-out\/","title":{"rendered":"FIFO (First In, First Out)"},"content":{"rendered":"\n

<\/a>What is FIFO (First In, First Out)?<\/h2>\n\n\n\n

In different fields like computer science, inventory management, and accounting, FIFO is a commonly used concept. It\u2019s simple \u2013 older items in a stock or queue are removed first. This principle helps ensure that goods go out in the order they came in. This is particularly important in industries with perishable goods\u2019 shelf life, and tracking costs over time.<\/p>\n\n\n\n

<\/a>How Does FIFO Work?<\/h2>\n\n\n\n

<\/a>Inventory Management<\/h3>\n\n\n\n

Businesses make use of FIFO so that they can sell their oldest items before newer ones. Over all others, this will mostly apply to perishable goods, whereby utilization of the oldest stock<\/a> assists in reducing waste and spoilage.<\/p>\n\n\n\n

Example: A milk delivery every week from a grocery shop means that the old stock will be sold first before displaying the new one. Such an arrangement ensures that the milk does not go bad before it is sold. <\/em><\/p>\n\n\n\n

<\/a>Accounting<\/h3>\n\n\n\n

FIFO is also used as a cost-flow assumption in accounting to determine the cost of goods sold (COGS) and ending inventory. For FIFO, COGS is calculated using the cost of the oldest inventory, while the ending inventory value is obtained by multiplying the cost of the most recent goods purchased by their quantity.<\/p>\n\n\n\n

Example: If a company buys 100 units of a product at $10 each and then buys 100 more at $12 each, under FIFO, the first 100 units sold would be valued at $10 per unit. The same can be arranged for<\/em> cryptocurrency<\/em><\/a>.<\/em><\/p>\n\n\n\n

<\/a>Computer Science<\/h3>\n\n\n\n

In computer science, FIFO is used in data structures like queues, where the first data element added to the queue is selected for processing first. It helps when there are tasks arranged according to the time they came.<\/p>\n\n\n\n

Example: In a printer queue, what gets printed first is what was sent to print first, ensuring all jobs are done in chronological order.<\/em><\/p>\n\n\n\n

<\/a>Benefits of Using FIFO<\/h2>\n\n\n\n

The use of FIFO has several benefits that help with inventory management and accounting issues, especially:<\/p>\n\n\n\n