Asked by dreya flores on Jul 14, 2024
Verified
GAAP requires the cost flow assumption to correspond to the actual physical flow of inventory.
GAAP
Generally Accepted Accounting Principles; the common set of accounting principles, standards, and procedures that companies use to compile their financial statements in the US.
Cost Flow Assumption
An accounting principle that determines how costs are allocated and reported, including FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and average cost methods.
- Understand the fundamental concepts of Generally Accepted Accounting Principles (GAAP) concerning inventory valuation and cost flow assumptions.
Verified Answer
MG
Monique GatesJul 20, 2024
Final Answer :
False
Explanation :
GAAP does not require the cost flow assumption to correspond to the actual physical flow of inventory; companies can choose any method (e.g., FIFO, LIFO, average cost) that best matches their financial situation, regardless of the physical movement of goods.
Learning Objectives
- Understand the fundamental concepts of Generally Accepted Accounting Principles (GAAP) concerning inventory valuation and cost flow assumptions.