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Inventory Valuation Methods: Last in First out

00:00 Introduction
01:00 Inventory Valuation Methods
01:51 Last In, First Out Method Explained
02:35 Last In, First Out Example
08:19 Last In, First Out Practice Question

LIFO stands for “Last-In, First-Out”. It is a method used for cost flow assumption purposes in the cost of goods sold calculation. The LIFO method assumes that the most recent products added to a company’s inventory have been sold first. The costs paid for those recent products are the ones used in the calculation.
Why Would You Use LIFO?
The LIFO method is used in the COGS (Cost of Goods Sold) calculation when the costs of producing a product or acquiring inventory has been increasing. This may be due to inflation.
Although the LIFO accounting method may mean a decrease in profits for a business, it can also mean less corporate tax a company has to pay. Should the cost increases last for some time, then these savings could be significant for a business.

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Melad Akbary

#accounting #acccountant #lifo