01-27-2014, 02:16 AM
1. LIFO method loses is effectiveness during times of inflation
2. LIFO method lowers profitability and shows current stock valued at the oldest price as the item purchased last at the higher price have been sold first and stock is left with older items purchased at lower prices than the currently high prices influenced by inflation.
3. In the FIFO method, oldest available purchase costs are transferred to cost of goods sold. That means the cost of goods sold has a lower value and the profitability of the organization becomes higher.
4. As the current stock is valued at recent most prices, the current assets of the company have the latest assessed values.
2. LIFO method lowers profitability and shows current stock valued at the oldest price as the item purchased last at the higher price have been sold first and stock is left with older items purchased at lower prices than the currently high prices influenced by inflation.
3. In the FIFO method, oldest available purchase costs are transferred to cost of goods sold. That means the cost of goods sold has a lower value and the profitability of the organization becomes higher.
4. As the current stock is valued at recent most prices, the current assets of the company have the latest assessed values.
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