What Does FIFO Stand For?

What does FIFO stand for, letter by letter?

Each of the four letters stands for one word, which makes FIFO a tidy acronym:

Speakers mostly pronounce it FY-foh, as a single word, the way NASA is said. Some say the letters, F I F O, and that is understood too. If you want to see why some short forms are spoken as words and others letter by letter, the guide what is an acronym walks through it.

How FIFO works in accounting

Businesses that hold inventory must decide which purchase cost to match with each sale. FIFO assumes the units bought first are the units sold first. The cost of the oldest units goes into cost of goods sold, and the newer, usually pricier units stay on the balance sheet as ending inventory.

When costs are rising, FIFO tends to show a lower cost of sales and a higher profit than LIFO does. FIFO is accepted under US accounting rules (GAAP) and under international standards, which do not allow LIFO. The method does not have to match how the goods move physically; it is a cost rule.

FIFO in kitchens, stockrooms and warehouses

Here the rule is physical, not just bookkeeping. Restaurant staff label containers with the date they were prepped and place new deliveries behind older ones on the shelf. Health inspectors often look for this rotation because it lowers the chance that food sits past its safe date.

Warehouses use FIFO for anything that can age, fade or go out of date: medicine, cosmetics, batteries, paint and packaged food. Some use a close cousin called FEFO, first expired, first out, which ships whatever has the nearest expiration date even if it arrived later.

FIFO in computing and everyday lines

Programmers use FIFO to describe a queue. Data that enters the queue first is processed first, like print jobs waiting in order or messages waiting to be sent. The opposite structure, where the last item added is the first one taken off, is called a stack.

You also meet FIFO at the deli counter with numbered tickets, in a drive through lane and on a phone hold line that promises calls are answered in the order received. None of these places use the word, but the rule is the same.

FIFO vs LIFO and other look-alikes

• LIFO, last in, first out: the newest units are treated as sold first. Allowed in the United States, not under international standards.
• FEFO, first expired, first out: rotation by expiration date rather than arrival date.
• Weighted average cost: blends all purchase costs into one average per unit.
• FIFO in some mining and oil regions: fly in, fly out, a work pattern where crews fly to a remote site for a set stretch and then fly home.

For more letters used in finance and operations, browse the business acronyms section.

Sample sentences using FIFO

• "Please FIFO the dairy cooler before the truck arrives."
• "Our company switched from LIFO to FIFO for its inventory reports."
• "The job scheduler handles requests on a FIFO basis."
• "Date every tub so the night crew can follow FIFO."
• "She took a FIFO job at a remote mine site."

Kitchen workers often use FIFO as a verb meaning to rotate stock, an informal but common habit.