The statement is true, It is independent of when payments are identified
What is cost flow method?
- There are several methods for accounting for cost flow. LIFO (last in, first out), FIFO (first in, first out), specific identification, and weighted-average cost are examples.
- For example, the prices of raw materials may fluctuate over time, with some being more expensive than others. The term cost flow assumptions refers to the process of removing costs from a company's inventory and reporting them as cost of goods sold.
- Cost flow assumptions in the United States include FIFO, LIFO, and average. (There is no need to make an assumption if specific identification is used.)
- A perpetual inventory system balance is compared to an actual physical count using the basic cost flow model.
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