The write-down of inventory:
A)Only affects the balance sheet and not the income statement.
B)Only affects the income statement and not the balance sheet.
C)Affects both the income statement and the balance sheet.
D)Affects neither the income statement nor the balance sheet.

Question

Quizplus · Accepted Answer

The write-down of inventory affects both the income statement and the balance sheet. It is recorded as an expense on the income statement, which lowers net income. At the same time, it also decreases the value of inventory on the balance sheet. This lower value of inventory then reduces the inventory asset account on the balance sheet, which in turn lowers the total assets of the company.

The Write-Down of Inventory