In making a changes to a method in an accounting practice/method, why do you think it...

In making a changes to a method in an accounting practice/method, why do you think it would be import to compare the reports(FIFO &LIFO) using both to give the reader the results using both methods. IE in your inventory change, what would be COS using both

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Expert Solution

It is very important to analyze the pricing trend before selecting a method of inventory accounting.

I have prepared an extract to summarize my point. In the extract, you will see with a given purchase price and quantity, the change in the cost of sales (COS) and closing stock value.

FIFO = First in and first out, where inventory which has been purchase first will be taken out first in the case of sales.

LIFO = Last in and last out, in this case, inventory which has been purchased at the latest date would be taken out first.

During a shift in accounting policy of inventory accounting, it is also important to note that the company would have to create a reserve.

ekkarill92 answered 2 years ago

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