WAEC Book Keeping 2025 Objective — Question 1
Question 1 of 42 from the West African Examinations Council (WAEC) Book Keeping 2025 Objective paper, with the correct answer and a full explanation.
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A disadvantage of the FIFO method of stock valuation is that:
- A. Closing stock is valued at current price
- B. Profit is overstated during inflationCorrect
- C. It is easy to understand and operate
- D. It is unrealistic
Explanation
A major drawback of FIFO is that during periods of inflation, older (cheaper) costs are matched against current sales, so profit appears overstated and tax liability increases.
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