What are the different inventory valuation methods?

What are the different inventory valuation methods?

There are several inventory valuation methods, including FIFO, LIFO, and weighted average cost. Would you like to know more about each?

Yes, can you explain FIFO and LIFO?

Sure! FIFO (First In, First Out) assumes that the oldest inventory items are sold first, while LIFO (Last In, First Out) assumes the newest items are sold first. This can affect your financial statements differently.

How does each method impact taxes?

FIFO typically results in lower cost of goods sold during inflation, leading to higher taxes, while LIFO can reduce taxable income.

Which method is generally preferred?

It depends on the business and economic conditions. FIFO is often preferred for its simplicity and better reflects current market value.