LIFO Full Form

What is the full form of LIFO?

Last In First Out is the full form of LIFO. LIFO is one method of data processing. The LIFO system operates under the principle that the last items added are the first to be taken out. This means that you can assess the most recent things your business added to its inventory and include them in your cost of goods sold calculations. The method is occasionally used by computers to extract data from an array or a data buffer. The system uses the LIFO approach whenever a program requests access to the most recent data entered.

This Story also Contains

1. What is the full form of LIFO?
2. Overview of LIFO
3. Characteristics of LIFO
4. General Operations
5. Uses of LIFO
6. Advantages and disadvantages of LIFO
7. Example of LIFO

Overview of LIFO

The most recently sold products were recorded as sold first under the LIFO method, which was established as an alternative to the base stock method in inventory accounting.

Technically, LIFO operates under the tenet that the last element saved will be taken out first. The new element is inserted on top of the old one to achieve this. In this manner, the most recent item is dropped from the top. And because it stays at the bottom, the oldest element—the one the operation met first—is removed last.

Characteristics of LIFO

• The LIFO principle is used to construct the linear data structure called Stack.

• The top end is where elements can be added to or removed.

• There is no set amount of Memory used because it varies depending on the operation.

• Therefore, a definite size is not necessary.

General Operations

The Stack data structure can be operated in the following ways:

• Push operation: Pushing an element into the stack's top position is known as a push operation.

• Pop operation: This refers to deleting the topmost stack element.

• Peek operation: This refers to returning the element at the top of the stack without erasing it.

Uses of LIFO

For a number of reasons, LIFO may be used in accounting:

1. Inflation: If your expenses for purchasing inventory or producing goods have been rising as a result of variables like inflation, you may want to employ the LIFO method.

2. Taxes: Although you might discover that using the inventory cost technique will reduce your company's revenues, it also enables your business to pay less corporate tax.

3. Savings: The LIFO approach might help your business boost its savings if your inventory and production costs are always rising.

The market environment has a significant impact on when LIFO should be used. If prices remain stable, companies might not need to employ this strategy. This is particularly true because LIFO bookkeeping can be considerably more complicated than FIFO, or first-in, first-out, bookkeeping, which is the more common form. This is due to the possibility that some of your earlier products are still in inventory and the Cost of goods sold (COGS) figure you determine might need to accurately reflect your actual inventory.

Advantages and disadvantages of LIFO

Advantages of LIFO

• It is simple to use and comprehend.

• It is used in numerous practical situations, including function calls, undo-redo operations, and string reversal.

Disadvantages of LIFO

• Given that LIFO only supports the Last In First Out approach, elements cannot be accessed arbitrarily.

• It is a less adaptable approach.

Example of LIFO

If a collection of compact discs (CDs) s is readily available. We may now access the CD just underneath the top CD if we remove the top CD. However, we must take out all of the CDs above in order to access the CD at the bottom of the stack. The bottom-most CD can only be accessed in this way.