One Advantage of FIFO Over LIFO Is That It Minimizes

question 16

True/False

One advantage of FIFO over LIFO is that it minimizes the distortion caused by inflation on net income.

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Definitions:

Investments

Assets purchased with the expectation that they will generate income or appreciate in value over time.

Net Income

The overall income of a business once every expense, such as operating costs and tax obligations, is deducted from gross revenue.

Operating Activities

Refers to the primary day-to-day activities of a business that relate to providing its goods or services, which are reflected in its earnings.

Indirect Method

A technique in financial accounting to prepare the cash flow statement, whereby net income is adjusted for non-cash transactions and changes in working capital.