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Compare and contrast the effects of LIFO and FIFO inventory costing methods on earnings in an inflationary period

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In detail, compare and contrast the effects of LIFO (Last-In, First-Out) and FIFO (First-In, First-Out) inventory costing methods on earnings in an inflationary period. Please include how these differences will affect the cost of goods sold, and the cost of sales on the balance sheet.

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Solution Summary

This 344 word solution contrasts LIFO (Last-In, First-Out) Vs FIFO (First-In, First-Out) Inventory Costing Methods and their effect on earnings and a balance sheet. In addition to an in-depth written explanation of the differences, this solution also includes a table that simply illustrates the differences between the two methods.

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LIFO and FIFO are inventory valuation techniques using in financial accounting to represent the amount of money that is tied up as inventory in a company's Balance Sheet and to also determine the 'cost of sales' or ' cost of goods sold' in the Income Statement.

The FIFO (First-In, First-Out) system assumes that the unit that was purchased or produced first (inventoried first) is sold first. For example, if a ...

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