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Under inflationary conditions, which of the methods will not show lowest value of closing stock?
  • a)
    FIFO
  • b)
    LIFO
  • c)
    Weighted Average
  • d)
     All of the above
Correct answer is option 'A,C'. Can you explain this answer?
Most Upvoted Answer
Under inflationary conditions, which of the methods will not show lowe...
Right answer is lifo because under inflationary conditions the recently purchased goods will be of higher price and hence we require the closing stock at lowest value therefore if we follow lifo then the goods which are purchased recently at Higher prices will be sold and those goods which are purchase at the beginning at lower prices will be in our closing stock
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Community Answer
Under inflationary conditions, which of the methods will not show lowe...
Under inflationary conditions, the method that will not show the lowest value of closing stock is FIFO (First-In, First-Out) and Weighted Average.

Explanation:

1. FIFO (First-In, First-Out):
- FIFO assumes that the goods purchased or produced first are the ones that are sold first.
- Under inflationary conditions, the cost of goods increases over time. As a result, the older inventory (purchased or produced at lower costs) is valued at a lower price compared to the newer inventory (purchased or produced at higher costs).
- Therefore, under FIFO, the closing stock is valued at the most recent cost, which is higher due to inflation. This results in a higher value for the closing stock.

2. LIFO (Last-In, First-Out):
- LIFO assumes that the goods purchased or produced last are the ones that are sold first.
- Under inflationary conditions, the cost of goods increases over time. As a result, the newer inventory (purchased or produced at higher costs) is valued at a higher price compared to the older inventory (purchased or produced at lower costs).
- Therefore, under LIFO, the closing stock is valued at the older cost, which is lower due to inflation. This results in a lower value for the closing stock.
- However, LIFO is not included as an option in the given question.

3. Weighted Average:
- Weighted Average method takes into account the average cost of all the goods available in stock.
- Under inflationary conditions, the cost of goods increases over time. As a result, the weighted average cost also increases.
- Therefore, under weighted average method, the closing stock is valued at a higher cost due to inflation. This results in a higher value for the closing stock.

Conclusion:
- In summary, under inflationary conditions, both FIFO and Weighted Average methods will result in a higher value for the closing stock. LIFO, which is not included as an option in the given question, would have shown the lowest value for closing stock as it values the older inventory at a lower cost.
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Under inflationary conditions, which of the methods will not show lowest value of closing stock?a)FIFOb)LIFOc)Weighted Averaged)All of the aboveCorrect answer is option 'A,C'. Can you explain this answer?
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