First-in First-Out (FIFO) Law and Legal Definition

First in first out method (FIFO) means that what comes in first will be handled first, what comes in next waits until the first one is finished. In other words, FIFO is a method of inventory valuation based on the assumption that goods are sold or used in the same chronological order in which they are bought. FIFO describes the principle of a queue processing technique or servicing conflicting demands by ordering process by first come, first served behavior. In a period of rising prices, this method results in a higher ending inventory, a lower cost of goods sold, a higher gross profit and a higher taxable income.