Accounting for IGCSE & O level - Advanced Principles (Section 5 - No. 49)
What is the impact of overstating closing inventory?
Overstated cost of goods sold, understated gross profit, and understated profit for the year
Understated cost of goods sold, overstated gross profit, and overstated profit for the year
No impact on the financial statements
Overstated cost of goods sold, overstated gross profit, and overstated profit for the year
Explication
Overstating closing inventory will cause cost of goods sold to be understated, leading to an overstatement of gross profit and profit for the year.