If a company makes an error when counting ending inventory in 2019, the effect of the error will cancel out at the end of 2020.

Question

Quizplus · Accepted Answer

An error in ending inventory in one year affects the cost of goods sold and net income for that year, but the error reverses in the following year as the beginning inventory is incorrect by the same amount, thus canceling out the effect over two years.

If a Company Makes an Error When Counting Ending Inventory