Last In, First Out (LIFO)

An accounting method for inventory and cost of sales. It assumes that the last items produced or purchased are sold first. This allows business owners to value inventory at the less expensive cost of the older inventory. LIFO is typically used during times of high inflation.
The LIFO method expenses inventory in the order of most recently acquired to least recently acquired when calculating the cost of goods sold. It uses current prices to calculate the cost of goods sold.