Asked by Keivan Golchini on Jul 24, 2024
Verified
If a company mistakenly counts less items during a physical inventory than actually exist, how will the error affect the cost of goods sold?
A) understated
B) overstated
C) no change
D) only inventory will be affected
Physical Inventory
The process of counting all physical goods and materials a company has in stock at a specific point in time.
Items Count
The process of tallying items in inventory, usually for the purpose of ensuring accuracy in stock levels and financial records.
- Examine the effects of inaccuracies in inventory on financial statements.
Verified Answer
MK
murali kumarJul 25, 2024
Final Answer :
B
Explanation :
When a company counts fewer items than actually exist, it reports lower inventory levels. This error leads to a higher cost of goods sold (COGS) because the ending inventory is an essential part of the COGS calculation. Lower ending inventory means higher COGS.
Learning Objectives
- Examine the effects of inaccuracies in inventory on financial statements.
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