Which inventory valuation method is most commonly used in practice?
Practice Questions
1 question
Q1
Which inventory valuation method is most commonly used in practice?
FIFO
LIFO
Weighted Average
Specific Identification
FIFO (First In, First Out) is commonly used as it reflects the actual flow of goods in many businesses, especially perishable items.
Questions & Step-by-step Solutions
1 item
Q
Q: Which inventory valuation method is most commonly used in practice?
Solution: FIFO (First In, First Out) is commonly used as it reflects the actual flow of goods in many businesses, especially perishable items.
Steps: 4
Step 1: Understand what inventory valuation methods are. These are ways to calculate the value of the goods a business has in stock.
Step 2: Learn about FIFO (First In, First Out). This method assumes that the first items purchased are the first ones sold.
Step 3: Recognize that FIFO is commonly used because it matches how many businesses operate, especially those selling perishable goods like food.
Step 4: Compare FIFO with other methods like LIFO (Last In, First Out) and weighted average. FIFO is often preferred for its simplicity and accuracy in reflecting actual sales.
