First In First Out (FIFO) is an inventory cost flow method used in accounting and inventory management. Under FIFO, the oldest inventory items are recorded as sold first, aligning with the natural flow of goods. This method is advantageous during inflationary periods, as it results in lower cost of goods sold and higher net income by using older, cheaper inventory costs. FIFO is widely used due to its simplicity and relevance to actual inventory usage. It provides an accurate reflection of inventory costs on balance sheets, aiding in financial analysis and decision-making.