Accounting for inventories is a major consideration for many companies because of its significance to which of the following financial statements?
A) Balance sheet.
B) Income statement.
C) Statement of Cash Flow
D) Both A and B.

Question

Quizplus · Accepted Answer

Accounting for inventories impacts both the balance sheet and income statement. On the balance sheet, inventories are reported as current assets and their value affects the calculation of working capital and current ratio. On the income statement, the cost of goods sold (COGS) is directly impacted by the value of ending inventory, which affects gross profit and net income.

Accounting for Inventories Is a Major Consideration for Many Companies