last-in, first-out

(lăst'ĭn' fûrst'out')
n.
A method of inventory accounting in which the most recently acquired items are assumed to have been the first sold. In a period of rising prices, this method yields a lower ending inventory, a higher cost of goods sold, a lower gross profit (assuming constant price), and a lower taxable income. Also called LIFO.

(Last In-First Out) A queueing method in which the next item to be retrieved is the item most recently placed in the queue. Contrast with FIFO.

Download Computer Desktop Encyclopedia to your iPhone/iTouch

An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold or disposed of first.

Investopedia Says:
LIFO assumes that an entity sells, uses or disposes of its newest inventory first. If an asset is sold for less than it is acquired for, then the difference is considered a capital loss. If an asset is sold for more than it is acquired for, the difference is considered a capital gain. Using the LIFO method to evaluate and manage inventory can be tax advantageous, but it may also increase tax liability.

Related Links:
We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line. Inventory Valuation For Investors: FIFO And LIFO

Method of accounting for Inventory that ties the cost of goods sold to the cost of the most recent purchases. The formula for cost of goods sold is:

beginning inventory + purchases - ending inventory = cost of goods sold

In contrast to the First In, First Out (FIFO) method, in a period of rising prices LIFO produces a higher cost of goods sold and a lower gross profit and taxable income. The artificially low balance sheet inventories resulting from the use of LIFO in periods of inflation give rise to the term LIFO cushion.

A method of Inventory whereby the most recent items acquired are considered the first ones sold. Items in inventory at the end of the year are treated as though they had been in the opening inventory, plus or minus acquisitions during the year as needed to make up the correct total. LIFO offers a lower amount of income during a period of rising inventory prices. Contrast with Fifo.

Inventory method in which it is assumed that goods are sold in the reverse order of their acquisition. Thus cost of sales is based upon the most recent costs. Ending inventory is based upon the costs of the earliest purchase made. During a period of inflation, net income is lower under LIFO than under First In, First-Out (FIFO) because current costs are being matched against revenue. However, the ending inventory figure in the balance sheet will be lower under LIFO than FIFO, because inventory is being stated in older dollars. A company can increase or decrease its earnings through the timing of inventory acquisitions. See also Dollar Value Lifo.

[LIFO] see first-in, first-out [FIFO]; inventory.