Inventory Accounting and Financial Statements

Inventory accounting directly impacts a company’s income statement and balance sheet.  There are also tax implications for the choice of inventory accounting method, which impacts after-tax cash flows.

Income Statement

Income statement represents a company’s financial performance over a period of time.  A company’s LIFO gross margin could be materially different that its FIFO gross margin, if the cost of the first goods purchased for inventory is materially different from the cost of the most recent goods purchased for inventory.