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In: Finance

Problem #3 Why is inventory change included on an accrual income statement and what effect would...

Problem #3

Why is inventory change included on an accrual income statement and what effect would a decrease in inventory value have on net farm income?

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Expert Solution

Inventory change is included in the accrual income statement and it is included because it is having effect on the cost of the goods sold and when there will be an increase in the closing inventory, it'll be leading to decrease in the cost of goods sold and vice versa so there has to be inclusion of inventory into the overall accrual income statement because it is affecting the cost of goods sold.

When there will be a decrease in the inventory value in the total income, it would mean that the total income will be INCREASING because there will be lower inventory and higher sales and it will be leading to increase into the overall income of the firm because of the selling of the higher units in terms of inventory.

jeff jeffy answered 2 years ago
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