1 Explain the Effect of the Following on the Financial

question 69

Essay

1. Explain the effect of the following on the financial statements:
Goods held on consignment were included in the ending inventory count.
Goods purchased FOB shipping point were in transit on the last day of the year. The goods were not counted as part of ending inventory.
Goods sold FOB shipping point were in transit on the last day of the year. These goods were not counted as part of ending inventory.
2. What happens if inventory errors are not found and corrected?

---

Definitions:

IFRS

International Financial Reporting Standards; a set of accounting standards developed by the International Accounting Standards Board (IASB) aiming for global consistency in financial reporting.

Maturity Value

The amount of money an investment will earn and pay out at the end of its life, including the initial principal and all accumulated interest.

Capitalize Interest

The process of adding interest costs to the balance sheet for the construction of long-term assets, instead of expensing them in the period they are incurred.

Economic Benefit Approach

A method used in accounting and taxation to evaluate transactions based on the economic value received as opposed to the legal form of the transaction.