FIFO stands for "First In, First Out," a method used in inventory management and accounting. This approach ensures that the oldest items in stock are sold or used first, which helps prevent spoilage and obsolescence. For example, in a grocery store, perishable items like milk and fruits are sold in the order they were received. In accounting, FIFO affects how costs are calculated for inventory. When prices rise, FIFO can result in lower cost of goods sold and higher profits, as older, cheaper items are accounted for first. This method is commonly used in various industries, including manufacturing and retail.