How does the market value of finished affect the transactions in accounting ?

The market value of finished goods can have a significant impact on transactions in accounting.

1. Inventory valuation: The market value of finished goods is used to determine the value of inventory on the balance sheet. If the market value of finished goods increases, the value of inventory will also increase, leading to higher assets and potentially higher profits. Conversely, if the market value decreases, the value of inventory will decrease, potentially leading to lower profits.

2. Cost of goods sold: The market value of finished goods can also impact the cost of goods sold. If the market value of finished goods is higher than the cost of production, the cost of goods sold will be lower, leading to higher profits. On the other hand, if the market value is lower than the cost of production, the cost of goods sold will be higher, potentially leading to lower profits.

3. Revenue recognition: The market value of finished goods can also impact revenue recognition. If the market value of finished goods is higher than the selling price, revenue may need to be adjusted to reflect the lower market value. This can impact the timing of revenue recognition and potentially lead to lower reported revenues.

Overall, the market value of finished goods plays a crucial role in determining the financial performance of a company and can impact various aspects of accounting transactions.