LIFO Accounting, or Last In, First Out, is an inventory valuation method where the most recently acquired items are considered sold first. This approach is often used in times of rising prices, as it allows businesses to match current costs with current revenues, potentially reducing taxable income. Under LIFO Accounting, the remaining inventory consists of older, less expensive items. This can lead to lower profits on paper during inflationary periods, but it may also provide tax advantages. Companies must consistently apply this method and disclose it in their financial statements to ensure transparency for investors and regulators.