Accounting for IGCSE & O level - Advanced Principles (Section 6 - No. 32)
If a company overstates its ending inventory, what is the impact on the income statement for the current period?
Cost of goods sold is overstated, and net income is understated.
Cost of goods sold is understated, and net income is overstated.
Cost of goods sold is unaffected, and net income is unaffected.
Cost of goods sold is understated, and net income is understated.
Forklaring
Overstating the ending inventory leads to an understated cost of goods sold and an overstated net income.