Accountants often call FIFO the balance sheet approach because the amount it reports for ending inventory better approximates the current cost of inventory.

Question

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FIFO assumes that goods are sold in the order they are purchased, resulting in the most recent costs being allocated to ending inventory on the balance sheet. This better reflects the current cost of inventory compared to methods like LIFO or average cost, which can result in significantly different values for ending inventory.

Accountants Often Call FIFO the Balance Sheet Approach Because the Amount