The Effect Of An Error Resulting In An Understatement Of Ending Inventory Is To:

Juni 27, 2022

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The effect of understated ending inventory. When the inventory asset is understated at the end of the year, then income for that year is also understated. The reason is that, if costs are not included in inventory, then by default they must have been included in the cost of goods sold. When this happens, costs are transferred from the balance.

One inventory cost flow assumption will result in different cost of goods sold from another inventory cost flow assumption only if: Inventory quantities change from the beginning to end of the year. A new product is added to inventory during the year. The cost of inventory items changes during the year. Since financial statement users depend upon accurate statements, care must be taken to ensure that the inventory balance at the end of each accounting period is correct. The chart below identifies the effect that an incorrect inventory balance has on the income statement. Expert solutions for question the effect of an error resulting in an understatement of endinginventory:1058534. The effect of an error resulting in an understatement of ending inventory is to: A) overstate the next period's beginning inventory.