The Selection of a Method of Inventory Costing Is Important

question 84

True/False

The selection of a method of inventory costing is important because it will affect reported profit, income tax expense (and, hence, cash flow), and the inventory valuation reported on the statement of financial position.

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Definitions:

Transactions

Economic activities or events that affect the financial position of a company and can be quantified in monetary terms.

Journal Entries

Written records of all the financial transactions of a business, which are then used to prepare financial statements.

Debits Equals Credits

A fundamental principle of accounting stating that for every transaction, the total debits must equal the total credits in a double-entry bookkeeping system.

Posting Reference Notation

A symbol, number, or letter added to ledger entries to identify the source document or journal where the transaction was first recorded.