If inventory is understated, net income is also understated because cost of goods sold will be overstated
Understate net income
FIFO (first in first out) is a method of account for inventory. With FIFO, if inventory costs are increasing your cost of goods sold will be lower than under the LIFO (last in first out) method. If inventory costs are increasing, FIFO will result in higher net income (lower COGS) than LIFO. If inventory costs are decreasing, FIFO will result in lower net income (higher COGS) than LIFO.
Last-in, first-out (LIFO)
If the government lowers your taxes your NET income increases.
The method of costing that will yield the highest net income is FIFO. FIFO stands for first in, first out.
Understate net income
expenses understated and therefore net income overstated
your net income increases, but your income tax decreases
your net income increases, but your income tax decreases
Yes this is right statement as if some expenses are forgot to record it overstated the net income and reduces the expenses but in actual there is less net income then shown in income statement.
FIFO (first in first out) is a method of account for inventory. With FIFO, if inventory costs are increasing your cost of goods sold will be lower than under the LIFO (last in first out) method. If inventory costs are increasing, FIFO will result in higher net income (lower COGS) than LIFO. If inventory costs are decreasing, FIFO will result in lower net income (higher COGS) than LIFO.
Last-in, first-out (LIFO)
If the government lowers your taxes your NET income increases.
Yes, changes in inventory do appear in the cash flow statement. Inventory is a current asset, and changes in inventory, such as purchases or sales, have an impact on cash flow from operating activities. An increase in inventory is subtracted from net income to calculate cash provided by operating activities, while a decrease in inventory is added back to net income.
The method of costing that will yield the highest net income is FIFO. FIFO stands for first in, first out.
Net income percentage = Net income / Revenue
Trading account statement does not report net of income taxes or net of income.