The inventory costing method used must match the physical flow of goods in and out of inventory.

Question

Quizplus · Accepted Answer

The inventory costing method (such as FIFO, LIFO, or weighted average) does not have to match the physical flow of goods. These methods are accounting techniques to value inventory and cost of goods sold, and companies can choose the method that best suits their financial reporting objectives, regardless of the actual physical flow of their inventory.

The Inventory Costing Method Used Must Match the Physical Flow