FIFO and LIFO Inventory Accounting
FIFO, first in-first out, means the items that were bought first are the first items sold. Ending inventory is valued by the cost of items most recently purchased. First-In, First-Out method can be applied in both the periodic inventory system and the perpetual inventory system.
The FIFO method is allowed under both Generally Accepted Accounting Principles and International Financial Reporting Standards.
FIFO is a good method for calculating COGS in a business with fluctuating inventory costs.