What is the main benefit of the "first-in, first-out" (FIFO) inventory method?

The "first-in, first-out" (FIFO) inventory method ensures that older inventory items are sold or used before newer stock. This is particularly important in fields where products have a shelf life or can become outdated, such as food, pharmaceuticals, and technology. By adhering to FIFO, organizations can minimize waste and avoid the financial implications associated with holding unsold, outdated stock.

Utilizing FIFO helps maintain product integrity and quality, ensuring that customers receive the freshest items available. Additionally, this approach can also contribute to accurate financial reporting by aligning the cost of goods sold with the actual flow of inventory. When older items are sold first, the costs associated with them are recorded in the financial statements, reflecting a more accurate picture of the company's inventory and profits. Thus, the main benefit of FIFO revolves around effective inventory management and maintaining product quality over time.