Why Are the Amounts Determined for Ending Inventory and Cost

question 144

Essay

Why are the amounts determined for ending inventory and cost of goods sold the same under both the periodic and perpetual inventory systems when FIFO is used but not when LIFO is used?

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Definitions:

FIFO

First In, First Out, an inventory valuation method where goods purchased or produced first are sold or used first.

LIFO Periodic

An inventory valuation method, Last In First Out, used in periodic inventory systems where the last items added to the inventory are assumed to be sold first.

Perpetual LIFO

Perpetual LIFO, or Last-In, First-Out, is an inventory accounting method continuously updating inventory and costs of goods sold by assuming the last items purchased are the first to be sold.