Question

Companies generally report their accounting method for inventory in the ____________.

1) income statement
2) notes to the financial statements
3) balance sheet
4) bottom section of the balance sheet and income statement

Answer 1

Companies disclose their inventory accounting method within the notes to their financial statements, which accompanies the core financial documents like balance sheets and income statements.

Step-by-step explanation:

Companies generally report their accounting method for inventory in the notes to the financial statements. The notes provide detailed information on accounting policies, procedures, calculations, and transactions that underpin the financial statements, ensuring that readers can understand and assess the reported figures accurately. For instance, details about accounting approaches, such as First-In, First-Out (FIFO) or Last-In, First-Out (LIFO), used for valuing inventories, would be found in these notes.