Asked by Cameron Simmons-Willis on Jun 05, 2024

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In assigning a cost to ending inventory, the cost flow has to follow the physical flow.

Cost Flow

Describes the manner in which costs move through a company's accounts, from the point of initial recording to their ultimate impact on financial statements.

Physical Flow

Physical flow pertains to the actual movement and processing of goods and materials through a production system or supply chain, often measured to assess efficiency and effectiveness.

  • Comprehend the crucial role of the cost-flow assumption in inventory regulation.
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SJ
Sunil JogpalJun 11, 2024
Final Answer :
False
Explanation :
The cost flow assumption in accounting does not need to match the physical flow of goods. Companies can choose from several methods (e.g., FIFO, LIFO, average cost) to assign costs to ending inventory, independent of the actual physical movement of products.