FIFO--Bancroft_Research-Paper

FIFO--Bancroft_Research-Paper - Running head: FIFO 1 FIFO:...

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Running head: FIFO 1 FIFO: First In, First Out; an Inventory Costing Method Misty Bancroft National University FIFO: First In, First Out; an Inventory Costing Method
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Running head: FIFO 2 When looking at a company’s balance sheet, income statement and cash flows, an important consideration is the method of inventory costing that they used. Total assets and shareholders’ equity can be affected on the balance sheet and net income can be affected on the income statement, if current assets are not managed properly and appropriately. There are several methods for costing inventory and they all produce different results. This is why inventory costing is an attractive area for fraud. Companies need to choose a method and stick with it. They cannot use one method to show lower net income on their taxes, and then use a different method for shareholders. The same method must be used on everything. The method we are going to discuss is the first in, first out method, also known as FIFO. The FIFO method asserts that as units are sold, they come from the oldest inventory first. Oldest costs are matched with revenue, which is in turn, is assigned to costs of goods sold (COGS). Inventory that was most recently purchased or manufactured would be assigned to ending
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FIFO--Bancroft_Research-Paper - Running head: FIFO 1 FIFO:...

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