In a period of rising prices, the statement of financial position will report a higher inventory amount if FIFO, rather than average-costing, is the cost flow assumption used.

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Under FIFO (first-in, first-out) method, the items purchased first are assumed to be sold first, leaving the more recent and higher-priced items in inventory. This results in a higher cost of goods sold and a lower ending inventory compared to the average-cost method. Therefore, in a period of rising prices, FIFO will report a higher inventory amount than average-costing, as the older and lower-priced items are assumed to still be in inventory.

In a Period of Rising Prices, the Statement of Financial