The use of the FIFO method generally increases taxable income:

Question

Quizplus · Accepted Answer

The FIFO (First-in, First-out) method assumes that the first inventory purchased is the first to be sold. As inventory costs increase over time, using the FIFO method will result in higher inventory costs being matched with revenue, which will increase taxable income. Therefore, the use of the FIFO method generally increases taxable income when inventory costs are increasing.

The Use of the FIFO Method Generally Increases Taxable Income