Understating ending inventory in the current period will understate cost of goods sold in the following period.

Question

Quizplus · Accepted Answer

Ending inventory is carried over to the next period as the beginning inventory. If ending inventory is understated in the current period, it will result in a lower beginning inventory in the following period, which will ultimately result in an understatement of cost of goods sold in the following period.

Understating Ending Inventory in the Current Period Will Understate Cost