Under FIFO method the first purchased inventory is considered to be sold first. In LIFO method the last purchased inventory is considered to be sold first.
<h3>What is FIFO?</h3>
FIFO, LIFO and AVCO are the three methods used for inventory valuation. In AVCO it is considered that the units purchased are at a single average rate and then sold.
At times of rising prices of goods the FIFO have the highest closing inventory value. While if used LIFO method in rising prices of goods the closing stock will be valued at lowest valuation. And the AVCO or weighted average method provides the mid of the two valuation.
The net income is higher in FIFO at the time of rising prices and the LIFO shows the lowest net income. Weighted average shows the net income at an average rate which is less than FIFO but greater than LIFO.
