What accounts are affected by inventory?

Inventory is an asset and its ending balance is reported in the current asset section of a company’s balance sheet. Inventory is not an income statement account. However, the change in inventory is a component in the calculation of the Cost of Goods Sold, which is often presented on a company’s income statement.Click to see full answer. In this way, how do you account for inventory?The accounting for inventory involves determining the correct unit counts comprising ending inventory, and then assigning a value to those units. The resulting costs are then used to record an ending inventory value, as well as to calculate the cost of goods sold for the reporting period.Additionally, what is not affected by ending inventory? The effect of overstated ending inventory. When an ending inventory overstatement occurs, the cost of goods sold is stated too low, which means that net income before taxes is overstated by the amount of the inventory overstatement. However, you then have to pay income taxes on the amount of the overstatement. Considering this, is inventory an asset or expense? When you purchase inventory, it is not an expense. Instead you are purchasing an asset. When you sell that inventory THEN it becomes an expense through the Cost of Goods Sold account.What is inventory accounting system?Inventory accounting is the body of accounting that deals with valuing and accounting for changes in inventoried assets. Inventory accounting will assign values to the items in each of these three processes and record them as company assets. Assets are goods that will likely be of future value to the company.