UPSC Exam > UPSC Videos > Commerce & Accountancy Optional Notes for UPSC > Methods of Valuing Material Issues - LIFO Method(Last In First Out)
Methods of Valuing Material Issues - LIFO Method(Last In First Out) Video Lecture | Commerce & Accountancy Optional Notes for UPSC
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FAQs on Methods of Valuing Material Issues - LIFO Method(Last In First Out) Video Lecture - Commerce & Accountancy Optional Notes for UPSC
| 1. What is the main principle behind the LIFO method of valuing material issues? |  |
Ans. The LIFO method (Last In First Out) values material issues based on the assumption that the most recently acquired materials are the first to be used or issued.
| 2. How does the LIFO method affect the cost of goods sold in a business? | |
Ans. The LIFO method typically results in a higher cost of goods sold compared to other inventory valuation methods, as it assumes that the most recent and presumably more expensive materials are used first.
| 3. Can the LIFO method be used for valuing material issues in all types of businesses? | |
Ans. The LIFO method may not be suitable for all businesses, especially those with perishable or rapidly changing inventory, as it may not accurately reflect the actual flow of materials.
| 4. What are some advantages of using the LIFO method for valuing material issues? | |
Ans. Some advantages of using the LIFO method include better matching of current costs with current revenues and potential tax benefits due to lower taxable income from higher cost of goods sold.
| 5. Are there any limitations or drawbacks to using the LIFO method for valuing material issues? | |
Ans. Some limitations of the LIFO method include potential distortions in inventory valuation during periods of inflation, reduced comparability with other businesses using different inventory valuation methods, and increased complexity in inventory management.
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Jan 06, 2025
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