Why this is mistaken
Match date, population, currency, and comparison basis. Use the ending reserve to bridge inventory and the reserve change to bridge period cost of goods sold. Trace quantity and layer cost before calling a change a liquidation. Keep the old-layer income effect separate from operating performance.
Where to watch
When this mistake may appear
- Subtract the ending reserve from current cost of goods sold.
- A reserve decline always proves liquidation.
- Liquidation income means operations improved.
Check your work
Your work may contain this mistake if:
- Uses unmatched scope, substitutes the ending reserve for its change, infers liquidation from one balance, or labels an old-layer effect as operating improvement.