Inventory Errors: Inventory Errors occur due to over-valuation or under-valuation of stock. Such errors are self correcting as Closing Stock of the current year becomes opening stock in the next year, thus they distort net income in only two consecutive years- the period of error and the next period. To discuss: Why do inventory errors affect financial users, when they actually correct themselves.

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Chapter 6, Problem 4DQ

To determine

Concept introduction:

Inventory Errors:

Inventory Errors occur due to over-valuation or under-valuation of stock. Such errors are self correcting as Closing Stock of the current year becomes opening stock in the next year, thus they distort net income in only two consecutive years- the period of error and the next period.

To discuss:

Why do inventory errors affect financial users, when they actually correct themselves.

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