First-in, last-out (FILO)

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Accounting: Method of inventory valuation based on the assumption that goods are sold or used in the opposite chronological order in which they are bought. Hence, the cost of goods purchased first (first-in) is the cost of goods sold last (last-out). To visualize this, it may be easier to consider inventory to be a stack of plates. The first plates added (first-in) will stay at the bottom of the stack as long as new plates are added on top. In times of rising prices the FILO method records the sale of the most recent (hence, more expensive) item first. FILO is the same as the last in, first out (LIFO) accounting method.


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