Why prefer fifo to lifo?

FIFO (First In, First Out) is often preferred to LIFO (Last In, First Out) because it more accurately reflects the flow of goods in many businesses, especially in perishable inventory contexts. FIFO aligns with the actual physical movement of products, reducing the risk of obsolescence and ensuring that older stock is sold first. Additionally, using FIFO can result in more stable profit margins during times of rising prices, as it matches older, lower costs with current revenues, leading to less tax liability.