Question

Which inventory method is better described as having a balance-sheet focus and why is it considered as such?

Answer 1

Last in, first out (LIFO) is an inventory method which is better described as having a balance-sheet focus, as it is considered as such better approximates inventory cost necessary to generate revenue.

The Last in, first out (LIFO) method is used to place an accounting value on inventory. This method used to account for inventory records the most recently produced items as sold first.

Last in, first out (LIFO) method is only used in the United States where all three inventory-costing methods can be used. Thus, companies that use LIFO inventory valuations are typically those with relatively large inventories.

Hence, LIFO is a method used to account for inventory.

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