In short
Specific identification tracks the actual cost of each inventory item, so cost of goods sold is the cost of the exact items sold. It is used for unique, high-value items such as cars, jewelry and real estate.
Key takeaways
- It matches costs and revenues exactly.
- For interchangeable items, it lets management manipulate income by choosing which units to treat as sold.
- It is impractical for large volumes of similar items.
Where it's tested
FAR: Inventory — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company uses LIFO for both tax and financial reporting. During a period of rising prices, which of the following is true relative to FIFO?