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Analyze the effects of an inventory error on various financial statement items.

The link between the balance sheet and the income statement can be seen through the effect of errors in inventory valuation.
Overstatement of ending inventory results in an understatement of the cost of goods sold and therefore an overstatement of net income.
The effects of errors in inventory may offset themselves over time. These are known as counterbalancing errors.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91624253

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