When inventory is shown on the balance sheet, both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.

Question

Quizplus · Accepted Answer

This statement is true. The method of determining the cost of inventory (e.g. First In First Out, Last In First Out, Weighted Average) and the method of valuing the inventory (e.g. lower of cost or market, retail method) should be disclosed in the notes to the financial statements. This provides transparency and helps users of the financial statements understand how the inventory is being measured and reported.

When Inventory Is Shown on the Balance Sheet, Both the Method