Final answer:
Inventory valuation methods like FIFO, LIFO, and weighted-average differ from specific identification in their approach to calculating cost of goods sold and ending inventory, each affecting income and asset valuation differently. Specific identification is the most accurate but is often impractical for large inventories.
Step-by-step explanation:
Inventory valuation methods like FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and weighted-average are often used in business accounting to determine the cost of goods sold and ending inventory. These contrast with the specific identification method which tracks the actual cost of specific inventory items. Each of these methods impacts the determination of income and asset valuation differently.
FIFO assumes that the oldest items are sold first, which may lead to lower cost of goods sold and higher profits during periods of inflation. LIFO, conversely, assumes the newest items are sold first, resulting in higher cost of goods sold and lower profits during inflation. Weighted-average takes a middle-ground approach, calculating an average cost for all items.
Specific identification is theoretically the most accurate as it directly matches costs to revenues for each item sold. However, it's not practical for all businesses, especially those with large amounts of similar inventory.