Since the price of items offered is higher in the LIFO method, the internet earnings will be lower.
Moreover, the internet profits and cost of goods bought for common fee method typically lie someplace between the LIFO approach and FIFO method.
“Because FIFO results in a higher internet profits all through durations of rising prices, it additionally results in higher profits tax expenses,” Ng said. “Conversely, if the LIFO technique is used in the course of a duration of rising prices, it will end result in decrease internet income. So, this technique would result in a decrease earnings tax expense.
Using LIFO commonly lowers net earnings but is tax positive when expenses are rising.
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