ATAR Notes: Forum

HSC Stuff => HSC Humanities Stuff => HSC Subjects + Help => HSC Business Studies => Topic started by: Rikahs on October 10, 2016, 12:19:40 pm

Title: Question regarding LIFO and FIFO
Post by: Rikahs on October 10, 2016, 12:19:40 pm

Hi,

I just wanted to confirm that LIFO is the inventory valuation method that overestimates costs of good right? If this is so, this would result in a lowered gross profit and thus a lower tax to be charged. I heard that this "evasion of tax" is not illegal within Australia. I was hoping whether someone could affirm this or tell me if I've written something incorrect.

Thanks and GoodLuck to everyone in HSC!

Title: Question regarding LIFO and FIFO
Post by: RuiAce on October 10, 2016, 12:25:05 pm

Yes that's correct. In general because prices are inflating, by using LIFO the COGS expense is increased, hence "unnecessarily" reducing the gross profit and the income tax expense.

Therefore it is made illegal