Inventory Errors in Books of Account
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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?
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Solution Summary
An explanation of the effects of inventory errors in books of account.
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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 ...
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