How Inventory Method Affects Financial Statements

The video tutorial discusses the impact of four inventory valuation methods—specific identification, FIFO, LIFO, and weighted average—on financial statements during inflationary and deflationary periods. Specific identification is precise, while FIFO results in lower COGS and higher profits during inflation. Conversely, LIFO leads to higher COGS and lower profits. Weighted average yields results between FIFO and LIFO. The tutorial emphasizes understanding these methods' effects on financial statements to make informed choices.

How does specific identification differ from FIFO and LIFO in terms of COGS and gross profit?

What are the effects of choosing FIFO during an inflationary period on gross profit and net income?

What is the role of weighted average in determining COGS and gross profit?

Explain the impact of LIFO on financial statements during a deflationary period.

Discuss the overall effects of inflationary and deflationary periods on financial statements.