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December 22, 2008

Why is the accuracy of inventory valuation so important?

Having an accurate valuation of inventory is important because the reported amount of inventory will affect 1) the cost of goods sold, gross profit, and net income on the income statement, and 2) the amount of current assets, working capital, total assets, and stockholders’ or owner’s equity reported on the balance sheet. In fact, an incorrect inventory valuation will cause two income statements to be incorrect. The reason is the ending inventory of one accounting period will automatically become the beginning inventory in the subsequent accounting period.

Learn more about Inventory and Cost of Goods Sold.

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5 Responses to “Why is the accuracy of inventory valuation so important?”

  1. mamdouh on January 5th, 2009 2:49 am

    I want any material for budget
    Thanks

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  3. liz on April 25th, 2009 6:32 pm

    Thanks you !!!!!! for all this information. It is very helpful.

  4. deepthi on October 19th, 2009 11:12 am

    sir i am studying cpt now i am going to appear in december month 09 then plz could u suggest me how to plan to study because i am weak in accounts

  5. deepthi on October 19th, 2009 11:14 am

    thanks sir for ur information

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