Accounting for IGCSE & O level - Final Statements (Section 10 - No. 26)
If the closing inventory is understated, what is the effect on the gross profit?
Gross profit will be understated.
Gross profit will be overstated.
Gross profit is not affected
It will affect the operating income
Explication
An understated closing inventory will lead to a higher COGS, which will lead to a lower gross profit.