In the current controversy over the use of the LIFO and the FIFO plans in inventory valuation, it has apparently not been generally recognized that each of these plans, as well as the "base-stock" plan, is based on a different set of expectations as to the life of the inventory and as to the future course of prices. Examination of the set of expectations implicit in each plan may help to determine which method should be used in a given situation. At least such an examination will help to clarify the economic issues involved in the debate. It will be helpful to consider first a method of inventory accounting not now much involved in the income controversy, although closely related to one of the disputed methods. This is the "base-stock" plan. Under this scheme there is assumed to be a minimum working stock which the firm must maintain at all times in order to continue doing business. Since this basestock cannot be sold without immediate replacement, the firm cannot convert the inventory into more liquid form by selling any or all of it when the market price rises, nor need it acquire more liquid resources to cover a loss when market price declines.