FIFO (First In, First Out) journal entries are bookkeeping entries that record a business’s transactions in the same way they occur: in the order they were received. This ensures that items with more “seniority” can be tracked and reported first. It’s beneficial for companies who need to show accurate inventory balances and cost of goods sold on their financial statements. By recording each transaction as it comes through the “door,” businesses can be sure that their financial records reflect current market values.
FIFO journal entries provide a simple but effective solution to the complex task of tracking and reporting financial information accurately. With proper documentation, businesses can ensure that their finances remain up-to-date and reliable.