Which one of the following statements is true?
A)Income manipulation is difficult under LIFO.
B)Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.
C)Companies may use LIFO for tax purposes and FIFO in the financial statements.
D)In periods of declining prices, LIFO will result in the payment of lower income taxes.

Question

Quizplus · Accepted Answer

Accounting principles, specifically the Generally Accepted Accounting Principles (GAAP), do not mandate that the inventory cost flow assumption (such as FIFO, LIFO, or average cost) must match the actual physical flow of goods. This allows companies flexibility in choosing an inventory accounting method that best suits their financial reporting objectives, as long as it is consistently applied and provides a fair representation of the company's financial condition.

Which One of the Following Statements Is True