Because an inventory error causes an offsetting error in the next period, it is sometimes said to be self-correcting.

Question

Quizplus · Accepted Answer

Inventory errors in one period do indeed often correct themselves in the next period because the ending inventory of one period becomes the beginning inventory of the next. This means that while the error may distort figures in the initial period (such as cost of goods sold and net income), it will typically be offset in the following period when the incorrect inventory figure is adjusted or corrected through the natural flow of accounting entries.

Because an Inventory Error Causes an Offsetting Error in the Next