LIFO vs. FIFO: Inventory Accounting for Investment Banking Interviews

LIFO and FIFO determine which inventory costs appear in cost of goods sold and which remain on the balance sheet. Interviewers often test whether you can trace those choices through the financial statements, especially when prices are rising.

Author: Michael Harris Updated 5 min read

Start with what LIFO and FIFO mean

FIFO stands for “first in, first out.” Under FIFO, the oldest inventory costs are recognized first in cost of goods sold, or COGS. As a result, the newest costs remain in ending inventory on the balance sheet.

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