Which inventory method generally results in the most realistic balance sheet valuation?
A)FIFO
B)Specific identification
C)LIFO
D)Average-cost

Question

Quizplus · Accepted Answer

FIFO (First-In, First-Out) inventory method generally results in the most realistic balance sheet valuation as it assumes that the items that were purchased or produced first are sold first, giving a more accurate representation of the current value of inventory. This method also follows the practical concept of physical flow of goods as it is easier to identify and track the inventory according to the order in which it was received. Thus, under FIFO, the balance sheet valuation of inventory tends to be more current and accurate.

Which Inventory Method Generally Results in the Most Realistic Balance