During periods of increasing costs, the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet that is higher than LIFO would produce.

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Quizplus · Accepted Answer

FIFO assumes that the first items purchased are the first items sold, resulting in the more recent and expensive inventory being left in stock. This means that during periods of increasing costs, FIFO will value inventory at a higher cost than LIFO, which assumes that the last items purchased are the first items sold, resulting in the older and cheaper inventory being removed from stock first.

During Periods of Increasing Costs, the Use of the FIFO