Accounting Online Program Certification Practice Test

What figure should be shown in the company's financial statements for closing inventory at 31 October 20X3?

1. £443,700

2. £461,500

3. £483,700

4. £500,000

The correct answer is: £461,500

In determining the closing inventory figure that appears in financial statements, it is essential to consider the methods of inventory valuation and the calculations leading to the final stock figure. The correct answer indicates that the closing inventory at 31 October 20X3 is £461,500. This figure could be derived from an accurate count of inventory, adjustments for any obsolete stock, the application of the appropriate inventory valuation methods such as FIFO (First-In, First-Out), LIFO (Last-In, First-Out), or weighted average cost. In the context of financial reporting, it is essential that the closing inventory accurately reflects the value of goods available for sale, which affects both the balance sheet and the income statement due to its impact on the cost of goods sold. The choice of £461,500 also implies that all necessary reconciliations and adjustments have been duly applied, ensuring that discrepancies between physical counts and recorded amounts have been resolved. This careful validation provides stakeholders with a reliable measure of the company's assets at the period end, leading to informed decision-making. Understanding the processes behind calculating this figure is crucial for financial reporting and analysis, reinforcing the importance of accuracy in presenting closing inventory values to stakeholders.