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

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An inventory error can be self-correcting because it may cause an offsetting error in the next accounting period. For example, if a company overstates its inventory in one period, this will result in an understatement of COGS and an overstatement of ending inventory. However, in the next period, if the company corrects the overstatement by reducing its beginning inventory, this will result in an overstatement of COGS and an understatement of ending inventory, which will offset the effects of the original error.

An Inventory Error Is Sometimes Said to Be Self-Correcting Because