Losses on reduction to LCM may be charged to either cost of goods sold or to a current loss account without distorting financial statement ratios.

Question

Quizplus · Accepted Answer

Charging losses on reduction to LCM (Lower of Cost or Market) to either cost of goods sold or a current loss account can distort financial statement ratios, as it affects the income statement and balance sheet differently, impacting profitability and liquidity ratios.

Losses on Reduction to LCM May Be Charged to Either