Assume an inventory with a cost of $8,000 has an impairment loss of $500 at the end of 2025. This means its correct value is $7,500. However, this loss was not recorded. This module shows how this single error impacts both financial statements. Click through each step to see the effect.
Statement of financial performance for year ended 31 Dec 2025
Sales Revenue$22,000
Cost of Sales$20,000
Gross Profit$2,000
Expenses (incl. Impairment)$500
Profit for the Year$1,500
Statement of financial position as at 31 Dec 2025
Current Assets:
Equity:
Inventory$7,500
Equity:
Equity (End of Year)$11,500