The LIFO method assumes the latest inventory purchased is the first to be sold. During periods of inflation, the use of LIFO will result in a higher cost of goods sold, lower inventory value and lower net income. Weighted average. Under this method, both inventory and cost of goods sold are based on the average cost of all items bought during a period. Specific cost.
Different rates for the cost of production for one unit, and this will create also different rates for the selling price for the same product. 6. This method makes the comparison for the units costs more difficult. FIFO and other inventory valuation methods: The below table shows a comparison between the FIFO, LIFO and average cost based on different standards: FIFO LIFO Average cost US GAAP and IFRS Accepted in both Accepted only at US GAAP Accepted in both Units sold include Oldest cost Newest cost Average cost Ending inventory include Newest cost Oldest cost Average cost Income statements effect Cost of goods sold less and high income Cost of goods sold higher and less income Cost of goods sold and income are between FIFO and LIFO Balance sheet effect Ending inventory is close to market price Ending inventory is not close to market price Ending inventory between FIFO and LIFO Taxes Better to use when taxes are low Better to use when taxes are high Taxes between FIFO and LIFO Practical exercise: Europe Company sold 1,400 units from tables during the month of March at price $35, compute inventory on March 31 and cost of goods sold for the month of March using following inventory costing methods: 1. First in, first out (FIFO) method 2.
IFRS permits to use FIFO and weighted average method but LIFO is prohibited IFRS applies the lower of cost or net realizable value. Historical inventory “cost” is used in applying the lower of cost or net realizable value over the entire period that the inventory is held. Write-downs are reversed as selling prices rise. Over the entire period of an enterprise, the amount of expense and profit are the same in the income statement on US GAAP and IFRS. However, the inventory and cost of goods sold balances can vary dramatically in any given period.
Again when prices rise the issue price does not reflect the market price as materials are issued from the earliest consignments. Therefore the charge of production is low because the cost of replacing the material will be higher than the price of issue. (iii) Last-in, First-out (LIFO) method : - The system assumes that the largest receipt of the materials in the stock is issued first. This method is sometimes known as the replacement cost method because the materials are issued at current cost to work orders except when purchases were made long ago. It is suitable in times of rising prices because materials will be issued in the latest consignment at a price which is closely related to the current price level.
ASSESSMENT B Section 1 : Discuss the significance of the hospitality industry to the regional, national and global economies Describe with clear reference to a range of sources, how the hospitality industry may be classified into different sub sectors Section 2 : INTRODUCTION: According to Saskia and Réau (2009) the origin of the tourism appeared between the middle of the XVII the end of the XIX century, where wealthy British were travelling in European countries from the northern countries until the Greek island and return to their countries lining the Mediterrannee. The globalization is defined by trading in the all world in every sector models such as; cultural, economic and political. Those models were developed by Northen countries since 1980 where international exchanges of people started. All countries of the world are now interdependent. Thanks to this improvement, its benefit for a wide range of different sectors like the hospitality Industry that means that people can travel all around the world.
The most special thing is construction business is far different from other business, it doesn’t like other business require a number of fixed assets like land, building, industrial machinery and so on. It can theoretically run even without the need for an office. For example, the machinery and personnel can be hired depending on the construction project, the site can be bought using borrowed capital and customer can buy the units through bookings, periodic work completion contracts and et cetera. The construction industry is strongly patronized by politicians and government entities in most developing and underdeveloped
Throughout the years, several different methods have been developed, which are dependent on the respective regulations of countries and institutions, such as the Internal Revenue Service (IRS). The most common inventory methods include FIFO (first-in, last-out), LIFO (last- in, first-out), HIFO (highest-in, first-out), FEFO (first-expired, first-out), as well as the average costing method (AVCO). Each of them has their specific advantages and disadvantages, and comes with certain restrictions and regulations (Lee and Hsieh, 1983, p.7). This paper is going to take a look at the choice of inventory accounting methods of FIFO and LIFO, and is therefore not going to consider the other inventory accounting methods, as that goes beyond the topic of this
Inventory is the total amount and quantity of finished goods and raw materials contained in a store/warehouse or factory at any given time. The raw materials in hand, work-in-process goods in production line and totally finished goods in warehouse that are thought to be a part of a
The field of hospitality has been exposed to students both on the secondary and tertiary level to get them ready for the industry. The industry is said to be mostly time consuming and of a high customer service and interaction base being the reason why persons tend to shy away from it. It is also said that it can be low paying and menial and doesn?t cater for a persons? quality of life which is false. ?The industry needs individuals who are willing and ready to expand and change with it?.
The first step is identify the value of the goods in the inventory and then value the goods with the accounting practices which is last in/last out basis (LIFO), first in/ first out (FIFO) basis and average cost. Cost of goods sold is one of the most relevant measures for inventory decision making. Last in/last out (LIFO) can be defined as selling the latest goods that are purchased lately first then only sell the goods that have been purchased before while first in/first out (FIFO) means that selling the goods that have been purchased first then only sell the goods that purchased