---
title: "FIFO"
description: "What is FIFO? First in, first out costs sales from the oldest stock first and values what's left at the latest costs. Learn how it works, with a worked example."
url: https://1flux.ai/glossary/fifo
last_updated: 2026-10-10
---

[Procurement and inventory](https://1flux.ai/glossary#procurement-and-inventory)

# FIFO

What is FIFO, and how does it compare with weighted average cost in a rising market?

Glossary Updated 10 October 2026

Definition

FIFO (first in, first out) is an inventory costing method that assumes the oldest stock is sold first, so cost of goods sold uses the earliest purchase costs and remaining stock is valued at the latest ones.

## What is FIFO costing in practice?

Each receipt forms a cost layer, and sales use up the oldest layer first, then the next.

Selling 150 units from two cost layers

Example

- Layer 1: 100 units at SAR 20

  SAR 2,000

- Layer 2: 50 of 100 units at SAR 24

  SAR 1,200

Cost of the sale

SAR 3,200

The 50 units left in layer 2 are valued at SAR 24 each, SAR 1,200 in all.

In a rising market FIFO shows lower cost of sales and higher stock value than [weighted average cost](https://1flux.ai/glossary/weighted-average-cost). FIFO is a costing assumption; it doesn’t require you to ship the oldest stock first, though perishable businesses often pick that way. See [weighted average or FIFO?](https://1flux.ai/blog/weighted-average-vs-fifo)

In 1flux

FIFO is one of three costing methods you can choose for each legal entity, with cost layers you can trace in the cost audit report. [See inventory costing and valuation](https://1flux.ai/products/inventory/costing-and-valuation)

Related

## Keep exploring

### [Weighted average cost](https://1flux.ai/glossary/weighted-average-cost)

A costing method that values all units at their average cost.

### [Standard cost](https://1flux.ai/glossary/standard-cost)

A set cost per item, with differences recorded as variances.

### [Inventory valuation](https://1flux.ai/glossary/inventory-valuation)

The money value of the stock you hold.

### [Costing and valuation](https://1flux.ai/products/inventory/costing-and-valuation)

Weighted average, FIFO or standard cost per company, with cost layers you can audit.

Last updated 10 October 2026