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Multiple Choice Question 61 Your answer is incorrect. Try again. What is the difference between FIFO (first in, first out) and LIFO (last in, first out) accounting? FIFO refers to the practice of firms, when making sales, assuming that the inventory that came in first (at a higher price) is being sold first During a period of rising prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet. During a period of falling prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet. LIFO refers to the practice of firms, when making sales, assuming that the inventory that came in last is being sold first (at a higher price)