During deflationary periods, the use of the LIFO method of costing inventory will result in a greater amount of net income than would result from the use of the FIFO method of inventory costing.

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During deflation, prices decrease over time. LIFO (Last In, First Out) results in older, higher-cost inventory being used up first, leaving lower-cost inventory on the balance sheet, which increases net income compared to FIFO (First In, First Out), where older, higher-cost inventory remains on the balance sheet.

During Deflationary Periods, the Use of the LIFO Method of Costing