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this inventory costing method is called FIFO ( first in first out ) thus ending inventory and COGS for the period are the same regardless of whether the perpetual or periodic inventory accounting system is used so during inflation periods the gross profit is the highest .
By selling oldest inventory first, the recently purchased inventory will be there in closing stock.
If the prices trend is increasing, the closing stock have higher cost. If the prices trend is decreasing, the closing stock have lower cost. Therefore, the costing method effect the value of closing stock.
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