FIFO Accounting, or First-In, First-Out, is an inventory valuation method where the oldest inventory items are sold first. This approach assumes that the first items purchased are the first ones to be used or sold, which can help businesses manage their stock more effectively and reduce waste. Using FIFO Accounting can impact financial statements and tax calculations. In times of rising prices, this method typically results in lower cost of goods sold and higher profits, as older, cheaper inventory is accounted for first. This can lead to higher taxes, but it also reflects a more accurate representation of inventory flow.