What is LIFO (Last In, First Out) in Retail? Explained

LIFO, or Last In, First Out, is an inventory accounting method widely used in the retail industry. Under LIFO, the most recently acquired inventory is assumed to be the first sold. This approach can have tax advantages during inflationary periods, as it attributes higher costs to goods sold, lowering taxable income. However, LIFO may not reflect the actual physical flow of goods. Many countries permit LIFO, but accounting standards may vary. It's a method that helps manage tax liabilities but can present challenges in accurately representing a company's cost of goods sold.