LP1 ASSIGNMENT: FINANCIAL STATEMENTS
Directions
In Part I, next to each item listed, you will identify which statement the item would appear. You will need to
determine whether it would appear on the income statement (I), balance sheet (B), or statement of cash flows
(CF). Then, for each group, explain the difference among the items listed. Finally, in Part II, discuss the
relationship between the three financial statements.
Part I
Set 1:
__B_ Inventory, ending balance
__I__ Cost of goods (inventory) sold during the period
_CF_ Cash paid to suppliers during the period
__B_ Accounts payable, ending balance
Difference:
Ending inventory is the total unit quantity of inventory in stock or its total valuation at the end of an accounting
period and the ending inventory figure is needed to derive the cost of goods sold, as well as the ending
inventory balance to include in a company’s balance sheet.
Cost of goods sold is the direct costs of producing the goods sold by a company. This amount includes the cost
of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution
costs and sales force costs. Cost of goods sold is deducted from revenues to calculate gross profit and gross
margin ant the value will change depending on the accounting standards used in the calculation.
