What is FIFO, LIFO, and FEFO?

FIFO, LIFO, and FEFO are inventory management methods determining the order in which stock is sold or used. FIFO (first in, first out) ensures the oldest inventory is sold first, preventing items from becoming obsolete or expired, and aligns with common accounting practices. LIFO (last in, first out) prioritizes selling the newest inventory first, which is uncommon in physical stock movement but used in U.S. accounting for specific tax benefits, though it's not allowed under IFRS standards. FEFO (first expired, first out) focuses on selling items with the nearest expiration dates first, essential for industries handling perishable goods like food and pharmaceuticals.

For practical implementation, use FIFO for general inventory management unless expiration dates are a concern, in which case FEFO is preferable. Implementing FEFO effectively requires a system capable of tracking batch or lot numbers along with expiration dates.