An incorrect valuation of the ending inventory affects the balance sheet but not the income statement.
BT: Knowledge

Question

Quizplus · Accepted Answer

An incorrect valuation of the ending inventory affects both the balance sheet and the income statement. It affects the balance sheet by incorrectly reporting the value of inventory and, consequently, the value of current assets and owner's equity. It affects the income statement by affecting the calculation of cost of goods sold and gross profit, which in turn impact net income.

An Incorrect Valuation of the Ending Inventory Affects the Balance