Which method (FIFO or LIFO) would be preferred for income duty purposes surrounded by period of waning prices? WHY?
Answers:
In period of on the way out prices, respectively shipment of merchandize you purchase would cost smaller quantity than the previous shipment, so if your cost formula be FIFO, you'd be value your climax inventory at the most recent (lower) costs, resulting in a lower culmination inventory, and in consequence greater COGS and lower profit, thereby resulting in a lower toll to be compensated.
well, LIFO (last in first out) would be base on a lower cost which would attach more profits...
FIFO (first within first out) is base on the very soon prices and profit border would be lower...
Depends on the business straight to use which one.. if your business is slow you may want to consider LIFO or quickly the other one...
Taking Financial Accounting are we? LIFO would be preferred because according to Last In First Out, the closing product to hit the shelf would be cheaper---since prices are falling. If you chose First In First Out, you would be buying products at the aged, highly developed prices.
The other respondants are unanimously correct - LIFO allows you to rationalization for the inventory to be precise consumed at lower prices. The single added consderations is if prices of the product and the unprepared materials both going down at matching rate?
Good luck.