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

Which of the following is necessary to accurately calculate the amount in the inventory account at the end of an accounting period?

Subtract ending inventory from purchases

Add ending inventory to cost of goods sold

Subtract purchases from beginning inventory and add cost of goods sold

Add purchases to beginning inventory and subtract cost of goods sold

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Verified step by step guidance

Understand the inventory formula: The inventory account at the end of an accounting period is calculated using the formula: \( \text{Ending Inventory} = \text{Beginning Inventory} + \text{Purchases} - \text{Cost of Goods Sold} \). This formula is derived from the flow of goods in a business.

Identify the components: \( \text{Beginning Inventory} \) is the inventory available at the start of the period, \( \text{Purchases} \) are the goods bought during the period, and \( \text{Cost of Goods Sold (COGS)} \) represents the cost of goods sold during the period.

Apply the formula: To calculate the ending inventory, add \( \text{Purchases} \) to \( \text{Beginning Inventory} \), then subtract \( \text{Cost of Goods Sold} \). This ensures that the inventory account reflects the goods remaining after sales and purchases.

Verify the logic: Adding purchases accounts for the increase in inventory during the period, while subtracting \( \text{COGS} \) accounts for the goods sold, leaving the remaining inventory.

Use the formula consistently: Always use \( \text{Ending Inventory} = \text{Beginning Inventory} + \text{Purchases} - \text{Cost of Goods Sold} \) to ensure accurate calculations for inventory at the end of the accounting period.