Question

True /False : When a company sells goods, it removes their cost from the Inventory account and reports the cost on the income statement as Cost of Goods Sold.

Answer 1

It is true that the cost of goods sold by a company is removed from the Inventory account and reported as Cost of Goods Sold on the income statement.

Step-by-step explanation:

True: When a company sells goods, it does indeed remove their cost from the Inventory account and reports the cost on the income statement as Cost of Goods Sold (COGS). Inventory represents the goods that have yet to be sold by the company. Once these goods are sold, the cost associated with acquiring or producing them is transferred from the Inventory account on the balance sheet to the Cost of Goods Sold on the income statement. This process accurately reflects the expenditures tied to the revenue generated from selling the goods.