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Because of its size, cost of goods sold normally has a significant impact on the amount...

Because of its size, cost of goods sold normally has a significant impact on the amount of net income that is reported on the income statement. Since the reported balance in the inventory account has a direct effect on the amount of cost of goods sold, inventory manipulation is a target for unscrupulous managers seeking to control the amount of reported earnings. These statements are

true

false

Business   Accounting   
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Answer #1

These statements are True.

Inventory management is highly cricital activity for every company, as it is vulnerable to theft, misappropriation and valuation. Since, it has direct effect on the amount of cost of goods sold which inturn effect the amount of net income reported on the income statement, inventory manipulation may lead to misstatement of reported income and it may distort the financial performance of the company. Hence, these statements are true.

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