Accurate Inventory Amounts Are Not Necessary for Accounting Purposes Because

question 8

True/False

Accurate inventory amounts are not necessary for accounting purposes because an error in inventory will "wash out" over a two-year period.

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Definitions:

Operating Cycle

The period of time it takes for a company to purchase inventory, sell it, and turn the sales back into cash.

Allowance for Doubtful Accounts

A contra-asset account used to reduce accounts receivable to its net realizable value, anticipating some accounts might not be collected.

Accounts Receivable

Funds that customers owe to a firm for delivered goods or services which have not yet been settled.

Bad Debt Expense

The portion of receivables that a company does not expect to collect, often treated as an expense in the income statement.