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What is the accounting objective which best relates to FIFO method?

1. Tax minimization

2. Income smoothing

3. Profit maximization

4. Accurate reporting

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Question added by Shamseer KM , HR Payroll Officer , Al Darwish Engineering W.L.L.
Date Posted: 2016/09/27
Tamer Elbeshbishy
by Tamer Elbeshbishy , Financial and Administration Manager , Muscat Towers Holding Group

Using FIFO method  usually \\used in FMCG and Pharmaceutical industries to help used old items before expiring. The following results will be found in this case;

1- considering lower cost for purchases

2- Obtaining bigger profit

3- Displaying at the Balance-Sheet inventory value  close to the current situation of market.

 

Accuracy of  Accounting dose not related directly with the issue.

kamran khalid
by kamran khalid , Head Of Finance , Pace College

Accurate Reporting

 

Because as a human nature Use older then newest because every thing has a life.

Salman Daud
by Salman Daud , Chief Accountant , Cool Inc

4. Accurate Reporting

As per FIFO, the stock which received first should be utilised first.

khalid Hassanien
by khalid Hassanien , Financial Manger , Alrwania Ltd

Answer is : 4. Accurate reporting.

FIFO ensures that the ending inventory values on the balance sheet are indicative of current market prices for the items. As items purchased at earlier dates are pulled from inventory for production or retail sale, the inventory on the books at the end of the month consists of more recently purchased inventory. This ensures that the ending inventory on the balance sheet is reflective of current market prices.