Failure to record the acquisition of goods directly affects the balance in Accounts payable and may result in an understatement of ending inventory.

Question

Quizplus · Accepted Answer

If the acquisition of goods is not recorded, it means that the amount owed to suppliers (Accounts Payable) is not reflected in the financial statements. This could result in an understatement of ending inventory as the cost of those goods is not included in the inventory account. Therefore, an understatement of ending inventory would result in an overstatement of cost of goods sold and a lower reported net income.

Failure to Record the Acquisition of Goods Directly Affects the Balance