FIFO Vs. Lifo Inventory Methods

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Robinson Financial Statements and the use of different Methods
Robinson financial statements project a lot of information regarding how well or bad the store is doing; in addition, many explanations can be developed by looking at the results. However, by using a specific accounting method, it might increase or decrease the accounts in the financial statements of the music store. Businesses choose specific accounting methods according to their needs, and what is best for the business.
FIFO vs. LIFO Inventory Methods
Inventory represents a large portion of assets, and it is important to analyze and understand how inventory is valued. There are different methods to analyze inventory; however the two most common are; FIFO and LIFO that are used to calculate the costs of goods sold and the ending …show more content…
FIFO (First in, First out) refers to the goods first added to the inventory are the first ones removed from the inventory sale. This is the most common method that most businesses use. In addition, FIFO produces the highest gross profit as long as the oldest inventory is cheaper than the new one, which many times this is the case, new inventory is more expensive than old inventory. One of the disadvantages of FIFO is that the business has to pay higher income taxes when compared to other inventory methods. LIFO (Last in, Last out) refers to the goods that are last added to the inventory are the first good to be sold. This method is not very popular because if inventory costs increases, costs of goods sold increases as well, and fewer profit is reported. The advantage of LIFO method is that income taxes will be lower as long as the newest inventory is most expensive than old one. The IRS allows the use of LIFO, but additional documentation is required. In my opinion, for

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