If ending inventory is understated, . cost of goods sold will also be understated accounts receivable balances will be overstated cost of goods sold will be overstated accounts payable balance will be understated

cost of goods sold will be overstated

Explanation:

An inventory turnover can be defined as a measure of the amount of times an inventory is used or sold by an organization at a specific period of time. The inventory turnover is calculated by dividing cost of goods sold by average inventory.

Generally, if ending inventory is understated, cost of goods sold will be overstated because it is typically considered to be an expense.

A periodic system of inventory can be defined as a method of financial accounting, that typically involves updating informations about an inventory on a periodic basis (at specific intervals) as the sales or purchases are being made by the customers, through the use of either an enterprise management software applications or a digitized point-of-sale equipment.

A perpetual inventory system is a type of inventory management that continuously records in real-time the amount of inventory sold or purchased through the use of enterprise software or technological software applications such as a point of sale (POS).

Under a perpetual system of inventory, updates of the journal entry for cost of goods sold or received would include debiting accounts receivable and crediting sales immediately as it is being made or happening. The advantage of the perpetual system of inventory over the periodic system of inventory is that, it ensures the inventory account balance is always accurate provided there are no spoilage, theft etc. Also, the periodic system of inventory is a function of the cost of goods sold.

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