Question

Answer the following question(s) completely and to the best of your ability.

• Why is an accurate value of ending inventory and cost of goods sold important?
• Have you ever participated in an inventory count for a retail business or observed one been done? If so, please describe the process.
• or talk about the cost of insuring inventory.  
• or talk about theft and how to determine that it has occurred using gross profit method.
• or ask me for another topic you are interest you.

Answer 1

Answer: Having an accurate value of ending inventory is important because the reported amount of inventory will effect

• The cost of goods sold, gross profit and net income on income statement and
• The amount of current assets, working capital, total assets, and owners equity reported on balance sheet .

In fact the inventory valuation will cause two income statement to be incorrect. The reason is the ending inventory of one accounting period will automatically become the beginning inventory in the subsequent accounting period .

Thus accurate value of ending inventory is important.

Having an accurate value of cost of goods sold is important because it is a measure that specifically intended to address the cost of selling a product.And it is an useful tool for evaluating the overall financial success of company.And it has significant impact on bottom line net operating profit before taxes(NOPBT)

Finally the cost of goods sold is the pulse of companies. It shows how profitable they are relatively and shows how profitable they are able to be.

Thus it is important to have the accurate value of cost of goods sold.