What is the difference between FIFO (first in, first out) and LIFO (last in, first out) accounting?
A) FIFO refers to the practice of firms, when making sales, assuming that the inventory that came in first (at a higher price) is being sold first.
B) During a period of rising prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet.
C) During a period of falling prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet.
D) LIFO refers to the practice of firms, when making sales, assuming that the inventory that came in last is being sold first (at a higher price).

Question

Quizplus · Accepted Answer

FIFO assumes older inventory is sold first, while LIFO assumes newer inventory is sold first. During rising prices, LIFO results in higher cost of goods sold and lower ending inventory value.

What Is the Difference Between FIFO (First In, First Out)