Question

The change in the Allowance to Reduce Inventory to LIFO balance from one period to the next is called the LIFO

a. Reduction.
b. Reserve.
c. Allowance.
d. Effect.

Answer 1

The change in the Allowance to Reduce Inventory to LIFO balance between periods is called the LIFO effect, which accounts for the impact of cost changes due to inflation or deflation when using the LIFO accounting method.

Step-by-step explanation:

The change in the Allowance to Reduce Inventory to LIFO balance from one period to the next is called the LIFO effect. This term is used in accounting to describe the adjustment made to the inventory value reported on a company's balance sheet when the Last In, First Out (LIFO) method is used to account for inventory costs. The LIFO effect reflects the impact of inflation or deflation on the cost of inventory; it increases if prices rise (leading to a higher cost of goods sold and lower reported income) and decreases if the opposite occurs.