Relax & Learn – FIFO Inventory Practice
Welcome to the FIFO Inventory Practice Game, where you can explore one of the most widely used methods in inventory management: First In, First Out (FIFO). This interactive tool helps students, beginners, and professionals understand how inventory moves, how stock rotation works, and how accounting values are affected by the FIFO method. By practicing in a fun, hands-on way, you will quickly see how FIFO applies both in real-world business operations and financial accounting.
What is FIFO?
FIFO stands for First In, First Out, which means that the oldest inventory purchased or produced is the first to be sold or used. Imagine a store selling milk cartons: the oldest cartons are placed at the front, ensuring they are sold before newer ones. This prevents waste, keeps inventory fresh, and avoids losses due to expired or outdated items.
In warehouses, retail stores, and even online businesses, FIFO helps maintain smooth stock rotation. By using older stock first, companies avoid unnecessary write-offs and maintain customer trust by ensuring that products are always fresh and reliable.
Why is FIFO Important in Accounting?
Beyond logistics, FIFO also plays a vital role in financial accounting. It directly affects how businesses calculate Cost of Goods Sold (COGS) and value their ending inventory on the Balance Sheet. Under FIFO, the cost of older (and usually cheaper) items is recorded first when sales are made, while newer (and usually higher-priced) items remain in inventory. This approach has several key impacts:
- Profit Margins: During periods of inflation, FIFO results in lower COGS and higher profits since older, cheaper inventory is matched against current sales.
- Taxes: Higher profits may mean higher taxes, but businesses may prefer FIFO for presenting stronger financial performance to investors.
- Inventory Valuation: Ending inventory reflects more recent purchase costs, giving a more up-to-date picture of stock value.
Learn by Doing – FIFO Inventory Game
In this interactive game, you will practice selling items in the correct FIFO order. By dragging and dropping inventory items, you’ll see how older stock is always moved out first, while newer purchases remain in the system. This activity helps you understand both the operational and accounting sides of FIFO in a simple, stress-free way.
Click Play Now and experience how FIFO works in practice. Strengthen your accounting and inventory management skills with our Relax & Learn approach today!
How to Play – FIFO Inventory Game
- Drag the item card (e.g., A – 2023-07-01) into the Purchase Basket.
- Items in the Purchase Basket are automatically arranged by date (oldest first).
- Click the arrow next to the oldest item to move it into the Sales Basket.
- ✅ Selling the oldest item first follows the FIFO (First-In, First-Out) rule and earns you points!
- ❌ Selling the wrong item deducts points and adds it to the Wrong Items list.
- Use the Restart Game button anytime to start fresh.
Relax & Learn – FIFO Inventory Game
Drag the item into the purchase basket, and sell in FIFO order by clicking the forward arrow!