Inventory accounting errors generally should correct themselves in the subsequent accounting period.

Question

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Inventory errors generally "correct" themselves at the end of the second period and are commonly referred to as a "counterbalancing error". This is one of the positive facts about inventory: eventually, all errors self-correct over time. So, if inventory is not counted one year, resulting in undervalued inventory and higher supply expense on the income statement, it will be caught and fixed in the second year when an additional count discovers the error and makes an adjustment.

Inventory Accounting Errors Generally Should Correct Themselves in the Subsequent