During a period of inflation, the LIFO method provides a larger cost of goods amount than does FIFO.

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LIFO (last in, first out) assumes that the most recent inventory purchases are sold first, resulting in higher-priced goods being sold first during inflation (when prices are increasing), which increases the cost of goods sold and reduces taxable income. In contrast, FIFO (first in, first out) assumes that the earliest inventory purchases are sold first, resulting in lower-priced goods being sold first, which decreases the cost of goods sold and increases taxable income.

During a Period of Inflation, the LIFO Method Provides a Larger