fifo and lifo accounting


  • The ending inventory would be calculated the following way: Thus, the balance sheet would now show the inventory valued at $5250.

  • Since the 1970s, some U.S. companies shifted towards the use of LIFO, which reduces their income taxes in times of inflation, but since International Financial Reporting Standards
    (IFRS) banned LIFO, more companies returned to FIFO.

  • The ending inventory would be calculated the following way: The balance sheet would show $4500 in inventory under LIFO.

  • [1] In the example above, the company (Foo Co.) (using LIFO accounting) would expense the cost associated with the first 75 units at $59, 125 more units at $55, and the remaining
    10 units at $50.

  • They are used to manage assumptions of costs related to inventory, stock repurchases (if purchased at different prices), and various other accounting purposes.

  • A company might use the LIFO method for accounting purposes, even if it uses FIFO for inventory management purposes (i.e., for the actual storage, shelving, and sale of its

  • FIFO and LIFO accounting are methods used in managing inventory and financial matters involving the amount of money a company has to have tied up within inventory of produced
    goods, raw materials, parts, components, or feedstocks.

  • In the United States, publicly traded entities which use LIFO for taxation purposes must also use LIFO for financial reporting purposes,[3] but such companies are also likely
    to report a LIFO reserve to their shareholders.

  • With FIFO, the cost of inventory reported on the balance sheet represents the cost of the inventory most recently purchased.


Works Cited

[‘1. Internal Revenue Code, § 472: Last-in, first-out inventories, accessed 23 December 2016
2. ^ “LIFO Reserve Definition”. AccountingTools. Retrieved 2011-11-09.
3. ^ “LIFO Conformity Rules”. Mondaq. Retrieved 2015-07-09.
4. ^ About Save LIFO
Coalition, accessed 23 December 2016 Photo credit:’]