What is the costing method where the first goods purchased are the first goods sold?

The costing method where the first goods purchased are the first goods sold is known as First In, First Out (FIFO). This method operates on the principle that the oldest inventory items are sold first, which aligns with how many businesses naturally move their stock. By using FIFO, a company matches the oldest costs against current revenues, which can result in advantages such as reducing the risk of inventory obsolescence and potentially providing a more accurate reflection of the cost of goods sold during periods of rising prices. FIFO is particularly beneficial in industries where perishable goods are involved, ensuring that products are sold before they spoil.

Other methods, like Last In, First Out (LIFO), would sell the most recently acquired items first, leading to different inventory valuations and impacts on profit margins. Just In Time (JIT) focuses on inventory management strategies to minimize stock on hand rather than how costs are recorded. Segmented Costing refers to breaking costs into different segments for analysis purposes rather than a specific method of inventory costing. Each of these alternatives serves a different purpose within accounting and inventory management contexts.