What is FIFO (First In, First Out)?
- FIFO (First In, First Out)
- FIFO is an inventory valuation method where the oldest units in stock are assumed to be sold or consumed first, reflecting the actual physical flow of most perishable and food products.
FIFO vs Moving Average
FIFO maintains separate cost layers for each receipt — goods received at ₹100 and then ₹120 are kept as separate lots. When goods are issued, the ₹100 lot is consumed first. Moving Average blends all receipt costs into one weighted average rate. FIFO gives more accurate gross margin when costs are rising.
FIFO in ERPNext
Select FIFO as the valuation method in Stock Settings. ERPNext maintains a stock layer queue per item per warehouse. Each Stock Entry or Delivery Note consumes from the oldest layer first. The Stock Ledger shows the layer-by-layer consumption, providing a clear FIFO audit trail.
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