Due to inflationary effects,inventory costs and depreciation write-offs can differ from their replacement values,thereby distorting profits.

Question

Quizplus · Accepted Answer

Inflation can increase the cost of inventory and decrease the value of assets, which can lead to inaccurate reporting of profits if the company uses historical costs to measure inventory and assets. This distortion can occur because the cost of replacing inventory or assets may be different from their original cost or recorded value.

Due to Inflationary Effects,inventory Costs and Depreciation Write-Offs Can Differ