Komal, you know that FIFO stands for First In, First Out. This is assuming that items sell in the same order they are bought, even though we know that not to necessarily be true.
Let's say Fred's Electronics buys 10 TVs on March 1 at $50 apiece. He spent $500, right?
If he sells 2 TVs on the 3rd and 5 more on the 5th, then he still has 3 left, or $150 in inventory.
Now, if he buys 5 more TVs on March 10 for $45 apiece, then he just spent another $225 on inventory, so he has $375 in inventory left.
By FIFO, if he sells 2 TVs on the 11th, then he sold two more of the $50 TVs, or $100 in inventory, so he has $275 in inventory left.
Again, by FIFO, if he sells 3 TVs on the 15th, then he has sold the last $50 TV and two $45 TVs, or $140 in inventory, so he has $135 left in inventory.
I hope this makes sense!
