Note: This functionality is available only if you have the Inventory Add-On Module.
The last-in first-out (LIFO) valuation method assumes that when items are removed from inventory, the inventory account is reduced by the cost of the most recently acquired item existing in inventory. Assuming that the costs to acquire inventory are subject to inflation, a LIFO cost flow assumption results in higher cost of goods sold, lower net income, and thus a lower tax liability.