Most accounting policy choices affect both the income statement and the balance sheet.Select the balance sheet account(s)that would be affected by a policy choice at the same time as the cost of goods sold income statement account.

Question

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Policy choices that affect cost of goods sold on the income statement typically involve inventory valuations or methods of cost allocation. These choices also impact the balance sheet account of inventories, as the value of the inventory on hand will change based on the policy choice. Choice A (accounts receivable) and choice C (prepaid expenses, accrued expenses, and liabilities) are not directly related to cost of goods sold. Choice D (property, plant and equipment; intangible and leased assets) may be affected by other policy choices related to depreciation, but not specifically related to cost of goods sold.

Most Accounting Policy Choices Affect Both the Income Statement and the Balance