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False!
As the prices would be rising, if you use FIFO at the end of the year you balance sheet would have the highest possible amounts. When you deduct that amount to get to cost of sales (Purcahses + opening -closing) As the COS would be smaller your taxable profits would be higher!
However the LIFO is not longer allowed by IAS2 and the average cost should not really make much difference (depending always on the company and its activities ).
FIFO stands for first-in, first-out, meaning that the oldest inventory items are recorded as sold first but do not necessarily mean that the exact oldest physical object has been tracked and sold. In other words, the cost associated with the inventory that was purchased first is the cost expensed first. if the company increase the price will get increase in Gross Profit , if the cost of goods sold that entry in the first was lowest than last purchases goods cost
false.
example:
you buy1 piece of commodity at $100 and sold it @$150,tax rate =20%
therefore tax amount =20% of $50 =$10
Now in case of rising, selling price rise to $200,Cost remains same as it is in stock
then tax amount =20% of $100 = $20
hence tax amount due increases due to FIFO in rising prices.
False.
False!
FIFO method brings lower cogs
When your cogs is lower you income before tax is higher
Sales - Cogs = Gross Profit - Operating Exp = Income Before Text. (other things remains constant)
when net income is higher your tax payable is higher.
LIFO cant be use further due to restruction in IFRS
true
