How to Use Accounting as Strategy

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How to Use Accounting as Strategy

Accounting isn't just a necessary evil; sometimes the methods used can be a key part of your

business strategy.

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Dear Jeff,

I'm starting a business and I know very little accounting. Does it make a difference which type of

inventory accounting method I use? Or does it all work out the same?

-- Name withheld by request

A lot depends on the nature of your business. In some cases accounting methods can actually be

part of your business strategy; inventory accounting is one of those methods.

Background first. There are four basic inventory accounting methods:

Specific identification

Weighted average

First-in, first-out (FIFO)

Last-in, first-out (LIFO)

Specific identification carries items on your books at their actual cost.Specific identification is