How do I choose between FIFO and LIFO for inventory management?

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

You should consider factors like tax implications, inventory costs, and how each method affects your financial statements.

Can you explain the differences between FIFO and LIFO?

FIFO (First In, First Out) assumes the oldest inventory is sold first, while LIFO (Last In, First Out) assumes the newest inventory is sold first.

Which method is better for tax purposes?

LIFO can provide tax benefits during inflation as it matches recent higher costs against revenues, reducing taxable income.

Are there any industries where one method is preferred over the other?

Yes, industries with perishable goods often prefer FIFO, while industries with non-perishable goods may use LIFO.