When maintaining perpetual inventory records, what difficulties arise when the LIFO cost flow method is used and sales and purchases occur intermittently?How can accountants deal with these difficulties?
What will be an ideal response?
When maintaining perpetual inventory records, using the LIFO cost flow methods leads to timing difficulties. The last-in, first-out (LIFO) cost flow method requires that the cost of the items purchased last be charged to cost of goods sold. When sales and purchases occur intermittently, the cost of the last items purchased isn't known at the time earlier sales occur. Accountants can solve cost flow timing problems by keeping perpetual records of the
quantities (number of units) of items purchased and sold separately from the related costs.
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