If a company mistakenly counts less items during a physical inventory than actually exist, how will the error affect the cost of goods sold?
A) understated
B) overstated
C) no change
D) only inventory will be affected

Question

Quizplus · Accepted Answer

When a company counts fewer items than actually exist, it reports lower inventory levels. This leads to a higher cost of goods sold because the cost of the uncounted inventory is not subtracted from the total cost of goods available for sale.

If a Company Mistakenly Counts Less Items During a Physical