Asked by Carol Rodgers on Jun 29, 2024
Verified
The consistent application of an inventory costing method is essential for
A) conservatism.
B) accuracy.
C) comparability.
D) efficiency.
Inventory Costing Method
A system used to evaluate the value of inventory, including methods such as First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and average cost.
Comparability
Ability to compare the accounting information of different companies because they use the same accounting principles.
Accuracy
The degree to which the result of a measurement, calculation, or specification conforms to the correct value or a standard.
- Grasp the principles behind the consistency, comparability, and disclosure requirements in inventory accounting.
Verified Answer
MB
Muhammad BasitJul 05, 2024
Final Answer :
C
Explanation :
The consistent application of an inventory costing method is essential for comparability. If a company changes its inventory costing method frequently, it becomes difficult to compare the financial statements of different years. It is important to consistently apply one method to ensure that the financial statements provide accurate and comparable information to investors and creditors. While accuracy and efficiency are important, they are not the main reason why a company should consistently apply its inventory costing method. Conservatism is a principle of accounting, but it is not directly related to inventory costing method.
Learning Objectives
- Grasp the principles behind the consistency, comparability, and disclosure requirements in inventory accounting.