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Homework answers / question archive / Read passage & reply back 250 words APA Some inventory errors are said to be self-correcting in that the error has the opposite financial statement effect in the period following the error, thereby correcting the original account balance errors
Read passage & reply back 250 words APA
Some inventory errors are said to be self-correcting in that the error has the opposite financial statement effect in the period following the error, thereby correcting the original account balance errors.
Despite this self-correcting feature, discuss why these errors should not be ignored.
Steps required to accounting for the error correction
· Financial statements for previous years are restated retrospectively
· A journal entry is made correcting any incorrect account balance
Bragg, S. and Bragg, S., 2020, The Effect of Overstated Ending Inventory – AccountingTools. [online] AccountingTools. Available at: https://www.accountingtools.com/articles/what-is-the-effect-of-overstated-ending-inventory.html [Accessed 24 June 2020]
Spiceland, J.D., Sepe, J.F., & Tomassini, L.A. (2007). Intermediate Accounting (4th ed.). Boston, MA: McGraw-Hill/Irwin.