JAMB Accounts Principles of Accounts 2012 Paper

Concept:$\mathrm{LIFO}$ assumes the most recently purchased goods are sold first, so the remaining stock comes from earlier purchases.Explanation:Under the $\mathrm{LIFO}$ (Last In, First Out) method, the latest goods received are the first to be issued out.Thus, the goods left unsold at the end of the period were bought at an earlier time.This means stock is valued at previous (older) prices and not at current prices.In a period of rising prices, valuing stock at previous prices gives a lower closing stock figure.A lower closing stock raises the cost of goods sold and reduces the reported profit.This lower profit reduces the tax payable, which is an advantage over $\mathrm{FIFO}$, where stock is valued at current, higher prices.Answer:A. previous prices