The use of LIFO in accounting for a firm's inventory:
A) Usually matches the physical flow of goods through the business.
B) Is usually used for internal management purposes.
C) Usually provides a better match of expenses with revenues.
D) None of these answer choices are correct.

Question

Quizplus · Accepted Answer

LIFO (last-in, first-out) accounting assumes that the last goods purchased are the first goods sold, which can result in higher costs of goods sold and therefore lower net income. This can provide a better match of expenses with revenues, especially during times of inflation when more recent inventory purchases may have cost more. It may not necessarily match the physical flow of goods through the business, and while it can provide useful information for internal management, it is also commonly used for external financial reporting purposes.

The Use of LIFO in Accounting for a Firm's Inventory