Which inventory method is better described as having an income statement focus and why is it considered as such?

Question

Quizplus · Accepted Answer

LIFO (Last In, First Out) is better described as having an income statement focus because it assumes that the most recent inventory purchased is the first to be sold, which results in a higher cost of goods sold (COGS) in periods of inflation. This better approximates the inventory cost necessary to generate revenue and therefore impacts the calculation of gross profit, operating profit, and net income on the income statement.

Which Inventory Method Is Better Described as Having an Income