Inventory valuation is based on an assumption regarding the flow of goods and has nothing to do with the actual order in which products are sold.

Question

Quizplus · Accepted Answer

Inventory valuation methods such as First-in-First-Out (FIFO), Last-in-First-Out (LIFO) or Weighted Average Method assume a flow of goods, but they do not reflect the actual order in which products are sold. The valuation is based on a calculation that determines the cost of goods sold and the value of ending inventory, and this calculation is based on the assumption of a certain flow of goods.

Inventory Valuation Is Based on an Assumption Regarding the Flow