Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 44 - No. 47)
If a company overstates its ending inventory, what effect will this have on the cost of goods sold (COGS) and net income?
COGS overstated, net income overstated
COGS overstated, net income understated
COGS understated, net income overstated
COGS understated, net income understated
Explanation
Overstating ending inventory understates COGS and therefore overstates net income.
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