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LIFO: The Last In First Out Inventory Method Businesses that sell things must take into consideration the worth of these products when filing their income taxes. The IRS has recognized a number of methods for valuing your inventory. One of these inventory valuation methods is last in, first out (LIFO). It is presumptive that during an accounting year, the first products sold are those that were last added to inventory. Now let’s look at LIFO, which stands for last in, first out in brief. What is LIFO, Or Last-In, First-Out? The Last-in, First-out (LIFO) is a technique of inventory valuation that is predicated on the idea that the last-produced or last-bought assets will be the ones to incur expenses. In other words, the most recent things produced or purchased are withdrawn and expensed according to the last-in, first-out method. As a result, the newest inventory expenses are expensed first while the older costs remain on the balance sheet. Retailers and auto dealerships are typical examples of businesses adopting LIFO inventory values because they can benefit from lower taxes (when prices rise) and better cash flows. However, many businesses prefer to utilize FIFO since, if a company uses a LIFO valuation when filing taxes, it must also use a LIFO valuation when reporting financial results to shareholders, which reduces net income and, ultimately, earnings per share. Contact us Email: - hello@profitjets.com Mobile: - 4696145050 Address: - 2803 Philadelphia Pike Suite B #205 Claymont, DE 19703 Visit us: - https://profitjets.com