LIFO (Last-In-First-Out) method assumes that the last goods purchased are the first goods sold. During inflation, LIFO results in higher cost of goods sold and lower profits because recent (expensive) costs are matched with sales. Closing inventory reflects older (cheaper) purchase prices, making inventory valuation conservative. LIFO provides better matching of current costs with current revenues. The method is accepted in many countries but not permitted under IFRS (IAS-2). In India, LIFO is generally accepted for tax purposes for certain items. Calculation uses recent purchase prices for COGS; closing inventory uses oldest purchase prices. During price appreciation, LIFO minimizes taxable profits. This method can be used with perpetual or periodic systems, though perpetual LIFO is more complex. LIFO layers create complexity in record-keeping but provide useful management information. Closing inventory value is conservative but may not reflect current market value. The method matches current revenues with current costs, providing better matching principle adherence. LIFO reserve (difference between FIFO and LIFO inventory values) is important disclosure. Exam tip: Create layering tables clearly showing which purchase prices are allocated to COGS and which remain in inventory; practice both periodic and perpetual LIFO calculations.