Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Inventory Errors

Financial Accounting

5. Inventory

Inventory Errors

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Multiple Choice

Items held for sale in the normal course of business are referred to as:

Accounts Receivable

Prepaid Expenses

Property, Plant, and Equipment

Inventory

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Verified step by step guidance

Understand the concept of 'Inventory': Inventory refers to items that a company holds for sale in the normal course of business. These are typically goods that are ready for sale or raw materials and work-in-progress items used in production.

Differentiate between the options provided: Accounts Receivable represents amounts owed to the company by customers for goods or services already delivered. Prepaid Expenses are payments made in advance for goods or services to be received in the future. Property, Plant, and Equipment are long-term assets used in operations, not items held for sale.

Recognize that Inventory is the correct classification for items held for sale in the normal course of business, as it directly aligns with the definition provided.

Relate this concept to the financial statements: Inventory is reported as a current asset on the balance sheet because it is expected to be sold or used within the company's operating cycle.

Apply this understanding to similar problems: Whenever you encounter items held for sale, classify them as Inventory unless the context specifies otherwise, ensuring clarity in financial reporting.