How do I choose between LIFO and FIFO?

What factors should I consider when choosing between LIFO and FIFO for my inventory?

You should consider factors like tax implications, cash flow, and the nature of your inventory. LIFO can reduce taxes in times of rising prices, while FIFO can provide a better cash flow.

Can you explain how LIFO and FIFO affect my financial statements?

Sure! LIFO typically results in lower net income during inflation, as older, cheaper costs are matched against current revenues. FIFO, on the other hand, shows higher profits as it matches newer, higher costs with revenues.

Which method is better for a business with perishable goods?

FIFO is generally better for perishable goods, as it ensures that older inventory is sold first, reducing waste.

Are there any legal restrictions on using LIFO or FIFO?

Yes, some countries have regulations regarding inventory accounting methods. For example, LIFO is not allowed under IFRS, while it is permitted under US GAAP.