someone clearly explains fifo and lifo. little confused. use numerical value examples ty
FIFO is where the first inventory that was purchased is sold first... LIFO is where the inventory that was purchased last is sold first...
E.g... We have 17 cars (purchased today) and 18 bikes (purchased last week)...
IF 20 PRODUCTS WERE SOLD......
> LIFO: 17 cars sold, and then 3 bikes
> FIFO: 18 BIKES and 2 CARS.
THe main purpose of LIFO and FIFO is for creative accounting ( to manipulate accounting figures), so if the initial purchases were less expensive, the profit on the profit and loss statement can be higher. If the later purchases were more expensive, LIFO is used to reduce the amount of tax that the business pays (REVENUE - COGS - EXPENSES).
