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Bizhelp
Bizhelp, Consultant
Category: General
Satisfied Customers: 5884
Experience:  Bachelors degree
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In periods of rising prices which will give a larger net income

Customer Question

In periods of rising prices which will give a larger net income fifo or lifo
Submitted: 5 years ago.
Category: General
Expert:  Bizhelp replied 5 years ago.
Hello,

Thanks for your question.

FIFO gives a larger net income in periods of rising prices because inventory that could be several years old is used to value the cost of goods sold.

Hope this helps!
Bizhelp and 42 other General Specialists are ready to help you
Customer: replied 5 years ago.
I Think I got it now. Can you break it down to me why you would use fifo for rising and lifo for decreasing
Customer: replied 5 years ago.
?
Expert:  Bizhelp replied 5 years ago.
Because this would increase net income. FIFO used in periods of rising prices means you are valuing your cost of goods sold from your older, lower priced inventory which means more profit. LIFO used in periods of falling prices means you are valuing your cost of goods sold from your newer, lower priced inventory which also means more profit.

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