Asked by Lauren Lawlor on May 12, 2024
Verified
An understatement of ending inventory results in an overstatement of net income.
Ending Inventory
The value of goods available for sale at the end of an accounting period, calculated before the next period's inventory is added.
Net Income
The net income of a company once all costs and taxes are subtracted from its revenues.
Overstatement
The exaggeration of income, assets, or worth in financial reporting.
- Understand the influence of inaccuracies in inventory valuation on financial reports and cash flow.
Verified Answer
EP
Edwin PerezMay 16, 2024
Final Answer :
False
Explanation :
An understatement of ending inventory results in an understatement of net income because it causes the cost of goods sold to be overstated, reducing the net income.
Learning Objectives
- Understand the influence of inaccuracies in inventory valuation on financial reports and cash flow.
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