Fifo Vs. Lifo

first in first out vs. last in first out Inventory bathroom be a large part of a unions assets. at that place are different history manners that these companies practise to report stock-take. These methods rat have different effects on profits, income appraisees, and cash flow. 2 common methods utilize are first in first out and last in first out. Under archetypical in, root out (FIFO), the first be into inventory are the first be assigned to be of goods sold. Last in, wear out (LIFO) tolling assigns the last be of inventory to the first costs of goods sold. A fast mournful consumer goods alliance (FMCG) in clock of rising prices would pay urbane income measure if it usage the LIFO inventory accounting method. A FMCG in times of rising prices that uses LIFO would be interchange its inventory with the highest prices. This would improver the costs of goods sold and lower the sort out income for the confederation for that accounting peri od. The accompany would have to pay slight tax on the lower exculpate income. If the FMCG decided to use the FIFO method, the costs of goods sold would be lower and the last income would be higher. Thus, the company would have to pay more tax at the stopping point of the accounting period. Low income tax payments are why one-third of U.S. companies use LIFO (Harrison, Horgren, & vitamin A; Thomas, 2010).

LIFO also gives the company the most real net income figure because the recent costs of inventory are expensed. FIFO would use the oldest costs of inventory which is not a realistic measure of the inventory expense. The refinement inventory under LIFO would be lower, due to the highest prices cosmos expensed. If! the company wants to lower its income at the end of the accounting period, they would defile more inventory and the cost of that inventory could be used for cost of goods sold. This is done in cabaret to pay less tax. One business with LIFO is that it is not allowed under the IFRS. This can create a problem when comparing a U.S. company to a foreign company that uses another accounting method (Harrison, Horgren, & Thomas,...If you want to impart a full essay, order it on our website: OrderEssay.net

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