Last In, First Out - LIFO


DEFINITION of 'Last In, First Out - LIFO'

An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold or disposed of first.

BREAKING DOWN 'Last In, First Out - LIFO'

LIFO assumes that an entity sells, uses or disposes of its newest inventory first. If an asset is sold for less than it is acquired for, then the difference is considered a capital loss. If an asset is sold for more than it is acquired for, the difference is considered a capital gain. Using the LIFO method to evaluate and manage inventory can be tax advantageous, but it may also increase tax liability.

  1. Specific Identification Inventory ...

    A method of keeping track of all items in an inventory. Specific ...
  2. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  3. Cost Of Goods Sold - COGS

    Cost of goods sold (COGS) are the direct costs attributable to ...
  4. Carrying Cost Of Inventory

    This is the cost a business incurs over a certain period of time, ...
  5. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  6. First In, First Out - FIFO

    An asset-management and valuation method in which the assets ...
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  1. What are some examples of a deferred tax liability?

    In the United States, laws allow companies to maintain two separate sets of books for financial and tax purposes. Because ... Read Full Answer >>
  2. How is accounting in the United States different from international accounting?

    Despite major efforts by the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, ... Read Full Answer >>
  3. What are the disadvantages of the FIFO accounting method?

    The first-in, first-out (FIFO) accounting method has two key disadvantages. It tends to overstate gross margin, particularly ... Read Full Answer >>
  4. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  5. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  6. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>

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