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'First In, First Out' is the acronym for the FIFO method. It is a system for keeping track of and valuing assets and goods. In process costing, FIFO is very essential. It is simpler to comprehend and to handle. It more closely resembles the reality of business activities, resulting in greater accounting accuracy. Most businesses would rather shift older products first, before they lose their market worth. As things are prepared for sale, inventory charges are assigned. This might happen because of the purchase of inventory or manufacturing costs, as well as the purchase of materials and the use of labor. These expenses are determined by the sequence in which the product was utilized, and in the case of FIFO, it is determined by what arrived first. An example, FIFO would assign the cost of the first item resold of $20 if ten products were purchased for $20 and ten more items were purchased for $30. Regardless of any future inventory purchases, the item's new cost would be $30 when 10 items were sold. The LIFO approach is the most popular FIFO-alternative. LIFO is a technique of accounting that differs from FIFO in that assets purchased or acquired last are disposed of first. Another option would be the average cost method.