First-in, first-out (first in first out) is peradventure one of the simplest methods of inventory accounting. This method is where the oldest items in inventory is used and sold first. What would then remain argon the recent items from the companys most recent purchases. During a time of increasing prices, FIFO has a high end point inventory; goods being sold are at a lower cost, the company gets a higher profit, and a higher taxable income. FIFO is the closest method that actually matches the sensual flow of inventory. Since FIFO allows the oldest inventory to be sold first, what a company has on hand is the most recent price. When splashiness occurs, the cost of products will be sold to the customers at the worst prices available (inc.com, 2012). According to Inc.com (2012), A major advantage of FIFO is that it has the effect of maximizing net income within an inflationary environment.
early(a) advantages of the FIFO method:
Main advantage: it is simple to comprehend, implement, and use
Its reasonable; first materials in, first materials out
FIFO is useful when there is a decline in prices
Disadvantages of the FIFO method:
Increase in possible clerical errors because when prices change, the clerk will have to be on top of changing prices of what remains in the warehouse
The renewing changes in cost of materials even though two jobs maybe using the same material it maybe at variant cost because the first material came in first at a different price, while the second job is at a lower of higher price
Reference
Inc.com. (2012), Inventory. Retrieved September 16, 2012 from http://www.inc.com/cyclopedia/inventory_pagen_2.html
Scribd.com. (2012). The advantages and disadvantages of FIFO method. Retrieved September 16, 2012 from ttp://www.scribd.com/doc/25162137/The-Advantages-and-Disadvantages-of-FIFO-MehtodIf you want to get a full essay, order it on our website: Ordercustompaper.com
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