The cost flow assumption selected by a company must correspond to the actual physical movement of the company's merchandise.

Question

Quizplus · Accepted Answer

The cost flow assumption selected by a company does not have to correspond to the actual physical movement of the merchandise. The company can select any appropriate method for cost flow assumption (such as LIFO, FIFO, or Average Cost) based on their financial reporting objectives and consistency with past practices.

The Cost Flow Assumption Selected by a Company Must Correspond