LAST-IN, FIRST-OUT.

The article focuses on the determination of the most efficacious way of valuing assets on a consistent basis in accounting. A primary function of accounting is to provide entrepreneurs and other interested persons with useful data upon which to base their decisions. This objective can logically be attained best by valuing assets in real terms by adjusting their monetary expressions to changes in the general price level. The shift of emphasis from the balance sheet to the income statement during the preceding two decades has spotlighted the inherent fallaciousness of the doctrine of conservatism. The understatement of an asset in the balance sheet of one account big period means an overstatement of profit in another period when the asset is physically consumed in the process of production. One way of retaining conservatism in the balance sheet, and of avoiding the perils of profit overstatement, has been suggested by the proponents of the base-stock method and of Last-in, First-out method.