FIFO and LIFO accounting

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FIFO and LIFO accounting are methods used in managing inventory and financial matters involving the amount of money a company has to have tied up within inventory of produced goods, raw materials, parts, components, or feedstocks. They are used to manage assumptions of costs related to inventory, stock repurchases (if purchased at different prices), and various other accounting purposes. The following equation is useful when determining inventory costing methods:

${\displaystyle {\text{Beginning Inventory Balance}}+{\text{Purchased (or Manufactured) Inventory}}=}$

${\displaystyle {\text{Inventory Sold}}+{\text{Ending Inventory Balance}}}$.^{[citation needed]}