Advantages and disadvantages of lifo, Accounting Basics

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Q. Advantages and Disadvantages of LIFO?

LIFO: Advantages (a) LIFO reports both sales revenue and cost of goods sold in current dollars and (b) lower income taxes result if used for tax purposes when prices are rising.

Disadvantages (a) habitually matches the cost of goods not sold against revenues (c) grossly understates inventory and (c) permits income manipulation.


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