FIFO (first-in-first-out)
A stock rule that sells the oldest purchase first, so goods leave in the order they arrived and your cost of sale follows the older price.
FIFO means the first unit you bought is the first unit you sell. It decides two separate things: which physical stock goes out of the door, and which purchase price is charged against that sale.
Why the order matters
Prices move. If you bought 100 pieces at ₹80 and another 100 at ₹95, the profit on today's sale depends on which lot you say you sold. Under FIFO the ₹80 lot goes first. Your cost of sale stays closer to the older price, and the stock left on the shelf is valued at the newer one.
Where it helps a shop
Goods that age — clothing, packaged food, electronics with model changes — should physically move FIFO whether or not you track it. Old stock at the back of the rack turns into dead stock quietly. Selling in order is the cheapest way to stop that.
When FIFO is the wrong rule
If your items carry an expiry date, FIFO is not enough. A later delivery can arrive with a shorter shelf life than one already on the shelf. In that case pick by expiry, not by receipt date.
A common mistake
Following FIFO in the books but not on the shelf. If your staff pick whatever is in front, your valuation says one thing and your godown says another. Match the two, or your stock take will keep throwing up surprises.