Accountancy MCQs
Topic Notes: Accountancy
General Description
Plato
- Biography: Ancient Greek philosopher (427–347 BCE), student of Socrates and teacher of Aristotle, founder of the Academy in Athens.
- Important Ideas:
- Theory of Forms
- Philosopher-King
- Ideal State
1
What is the full form of the inventory valuation acronym LIFO?
Answer:
Last in, First Out
LIFO stands for Last-In, First-Out. It is an inventory management method where the costs of the most recently acquired items are assigned to the goods sold first. This approach assumes that the newest inventory is utilized or sold before older stock, which can impact reported profit and tax liabilities.
2
Which inventory valuation method assumes that the most recently acquired items are the first ones sold?
Answer:
LIFO
The Last-In, First-Out (LIFO) method operates on the assumption that the inventory items purchased most recently are the first ones to be sold. Consequently, the cost of goods sold reflects the most recent costs, while the ending inventory is valued at older costs. This method is often used to manage tax liabilities during periods of rising prices, though it is prohibited under IFRS.
3
Which inventory valuation method assumes that the most recently purchased items are the first ones sold?
Answer:
LIFO method
The Last-In, First-Out (LIFO) method operates on the assumption that the inventory items purchased most recently are the first ones to be sold. Consequently, the costs assigned to the cost of goods sold are based on the most recent purchase prices, while the remaining inventory is valued using older costs.