An Understatement of Ending Inventory Causes the Cost of Sales

question 43

Short Answer

An understatement of ending inventory causes the cost of sales for the period to be overstated/understated)__________________.

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Definitions:

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits.

Debts And Obligations

Financial commitments or responsibilities, such as loans and promissory notes, that an entity is required to pay to others.

Future Economic Benefits

The capability to assist in the direct or indirect increase of cash and cash equivalents for an organization.

Economic Entity Assumption

An accounting principle that assumes a company and its owners are separate entities for recording and reporting financial transactions.