LIFO stands for which inventory valuation method?

LIFO stands for which inventory valuation method?

• A. Last In, First Out
• B. First In, First Out
• C. Last Out, First In
• D. First In, Last Out

Answer: (A)

LIFO represents a cost flow assumption where the newest inventory is used or sold first. It stands for Last In, First Out, so the items most recently purchased are charged to cost of goods sold, while older items remain in ending inventory. This matters most when prices are rising: COGS goes up because it uses the latest, higher costs, and ending inventory reflects older, lower costs. The other phrases don’t describe the standard method: First In, First Out would use the oldest inventory first, and the remaining two options aren’t recognized inventory valuation terms.

LIFO represents a cost flow assumption where the newest inventory is used or sold first. It stands for Last In, First Out, so the items most recently purchased are charged to cost of goods sold, while older items remain in ending inventory. This matters most when prices are rising: COGS goes up because it uses the latest, higher costs, and ending inventory reflects older, lower costs. The other phrases don’t describe the standard method: First In, First Out would use the oldest inventory first, and the remaining two options aren’t recognized inventory valuation terms.