In the Following Questions, Inventory Errors Are Noted for 2018

question 146

Essay

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = Understated; O = Overstated; NE = No effect

- $$\begin{array} { | l | l | l | } \hline { \text { Error } } & \text { Cost of goods sold } & \text { Retained earnings } \\\hline \text { Understated beginning inventory } & & \\\hline\end{array}$$

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Definitions:

Invoice

A paper provided by the seller to the purchaser, listing the items, amounts, and confirmed pricing for goods or services rendered by the seller.

Payment Date

The specific date on which a payment is due or processed.

Cost

The amount of money required to purchase something or to produce a good or service.

Invoice

A document issued by a seller to a buyer that lists goods or services provided and the amount due.