There may be instances of incorrect recording of inventory data in the books of account. As closing inventory is carried forward in the general ledger of the next accounting period, as opening inventory, an incorrect recording of inventory in one accounting period can affect the accounts of the subsequent period.
Consider the features of accounting for inventory and respond to the following:
•What are the effects of inventory errors?© BrainMass Inc. brainmass.com October 25, 2018, 9:41 am ad1c9bdddf
Inventory errors can affect the number of total costs of goods sold, net income, and gross profit. The allocation of amounts between periods will be incorrect therefore making the financial statement incorrect. There will be no effect on the balance sheet in the current period.
The cost of goods sold includes the beginning inventory and net purchases (Cost Of Goods Sold = Beginning Inventory + Purchases - Closing Inventory). Causing any ...
An explanation of the effects of inventory errors in books of account.
1) Would you say that Credit postings to the accounts receivable general ledger account come from the cash receipts journal and the general journal.
True or False
2) Sales revenue minus sales returns and allowances and sales discounts equals: (a) Gross margin (b)Income from Operations (c) Cost of goods sold (d) Net sales.
3) If the balance on the bank statement does not equal the balance in the company's then:
(a) The bookkeeper made a mistake (b) The bank made a mistake (c)Both the bank and the bookkeeper made a mistake (D) It is perfectly normal for the two balances to be different.
4) The entry to record the return of $30 of inventory to a supplier to under the Perpetual inventory system is recorded with a debt to:
(a) accounts payable and a credit to purchase discounts. (b) Purchase returns and allowances and a credit to accounts payable. (c) Accounts payable and a credit to inventory (d) inventory and a credit to accounts payable.
5) The column total for Other Accounts in the cash payments journal is not posted to the general ledger.
TRUE OR FALSE
6) If an individual paid a creditor on account. Assuming the use of special journals,this entry would be recorded in which book:
(a) Cash receipts journal (b) Purchase Journal (c) General Journal (d) Cash Payments Journal.
7) All of the following would be on the book side of a bank reconciliation except:
a) Bank recorded a $2,000 deposit as $200
b) Collection of note receivable for $1,000
c) Non sufficient funds check for $75.00
d) Service fee of $20.00