Question

What are the two methods of accounting to be used for materials and supplies inventory according to GASB?

1) FIFO and LIFO
2) Weighted Average and Specific Identification
3) FIFO and Weighted Average
4) LIFO and Specific Identification

Answer 1

According to GASB, the two accounting methods for materials and supplies inventory are FIFO (First-In, First-Out) and Weighted Average cost. These methods help to systematically account for inventory in governmental entities.

Step-by-step explanation:

The two methods of accounting for materials and supplies inventory according to the Governmental Accounting Standards Board (GASB) are FIFO (First-In, First-Out) and Weighted Average cost. FIFO assumes that the oldest items purchased or produced are sold first, which can impact the cost of goods sold and ending inventory value during periods of inflation. On the other hand, the Weighted Average method averages out the cost of inventory items, which smooths out price fluctuations over time. Both methods are used to provide a systematic and consistent way of accounting for materials and supplies in inventories for governmental entities.