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In periods of rising prices which will give a larger net income fifo or lifo
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!
Experience: Bachelors degree
I Think I got it now. Can you break it down to me why you would use fifo for rising and lifo for decreasing
?
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.