Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 18 - No. 2)
If a company overstates its ending inventory, what will be the impact on the net income for that period?
Net income will be unaffected.
Net income will be overstated.
Net income will be understated.
It depends on the cost of goods sold.
Explanation
Overstating ending inventory reduces the cost of goods sold, increasing net income.
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