Explain how a company can change its method of costing inventory?
Inventory costing is an accounting technique that allows a business financial manager to change the way inventory is recorded on the company’s books. The primary reason and purpose to change an inventory costing method is so that it has a positive financial impact on the company’s financial statements however the accountant will need to make sure that any change is implemented consistently across the company’s books. The different kinds of inventory costing methods are:
- First in First Out (FIFO)
- Last in Last out (LILO)
- Specific identification method
- Average cost method