Transactions that affect inventories on hand have an effect on both the balance sheet and the income statement.

Question

Quizplus · Accepted Answer

Transactions that affect inventories on hand impact the balance sheet by increasing or decreasing the value of assets (inventory) and liabilities (accounts payable). The impact on the income statement is reflected in the cost of goods sold (COGS) which is the expense associated with the inventory sold during the period. As inventory increases or decreases, the COGS also changes, affecting the net income reported on the income statement.

Transactions That Affect Inventories on Hand Have an Effect on Both