What are the different inventory methods and their impacts?

What are the different inventory methods and how do they impact financial statements?

The main inventory methods are FIFO, LIFO, and weighted average. Each affects cost of goods sold and net income differently.

Can you explain how FIFO and LIFO affect taxes?

FIFO typically results in lower taxes during inflation because it reports higher net income, while LIFO can reduce tax liability.

What are the advantages of using the weighted average method?

The weighted average method smooths out price fluctuations and provides a consistent cost of goods sold, which can simplify accounting.

How do these methods affect cash flow?

Different methods can impact cash flow by altering the timing of tax payments and the reported profitability, influencing investment decisions.