The End of Lifo

In: Business and Management

Submitted By hyphyjay
Words 687
Pages 3
The End of LIFO
Jordan Stepney
9910 Pineville Rd Apt 205
Raleigh, NC 27617
Jordanjay15@yahoo.com
919-770-0972
ACCT525 Current Acct Issues
Professor Sharon Brown
08/14/2016

Introduction

An interesting topic that I chose is LIFO accounting. LIFO stands for last in and first out. LIFO is a valuation method of inventory. The other valuation methods of inventory is FIFO, which stands for first in and first out and weighted average. FIFO is a popular valuation method along with LIFO.

LIFO has its advantages and disadvantages. The advantages of LIFO is that current product is measure along with its current revenues. The current market prices are matched up with current revenues. As for FIFO the older costs is matched with the recent revenues, which understates the profit. As for the LIFO it’s a great measurement of current profit and it understates the cost of goods sold, which more of a profit is created.

History

LIFO is the valuation of inventory. Well the word inventory deprived from England. LIFO was the first inventory valuation method to be used. The idea of LIFO was to match up current costs with the current revenues. In 1918 LIFO was first discussed in The Revenue Act during World War I. America discussed that LIFO shouldn’t be change and should remained the same as England described LIFO.

In the early 1930’s the LIFO talk started to progress. In 1936 Board of Directors of American Petroleum Institute recommended that companies should use the inventory valuation of LIFO. The board of directors described that LIFO was way to describe the profit of the sales from the actual raw materials.

Current Issue

The current issue of LIFO accounting is that the valuation method is manipulating. Its manipulating because the point that some companies use LIFO because it causes them the company to be reduced tax. Some companies use LIFO…...

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