preview

The Effect Of Writing Off The Inventory On The Current Year 's Income

Decent Essays
What effect will writing off the inventory have on the current year’s income?
The effect of writing off the inventory for the year’s income is one that has a drastic effect on the balance sheet according to Porter and Norton (2013) because, it determines the amount eventually recognized as an expense on the income statement. An error in assigning the proper amount to inventory on the balance sheet will affect the amount recognized as cost of goods sold on the income statement. (Using Financial Accounting Information: The Alternative to Debits and Credits, 9th Edition, section 5-6, para 2)
What effect does not writing off the inventory have on the year-end balance sheet?
The effect of writing off the inventory will have a greater effect at the end of the year according to Porter and Norton (2013) because, The amount assigned to ending inventory is deducted from cost of goods available for sale to determine cost of goods sold. If the ending inventory amount is incorrect, cost of goods sold will be wrong; thus, the net income of the period will be in error as well. (Using Financial Accounting Information: The Alternative to Debits and Credits, 9th Edition, section 5-6, para 3)
What factors should you consider in deciding whether to persist in your argument that the inventory should be written down? 2 Corinthians 9:8 says: "And God is able to make all grace abound toward you; that ye, always having all sufficiency in all things, may abound to every good work." Whenever we
Get Access