PRC-1 · Chapter 4 · Question 9 of 100
'Crescent Corp' overlooked an accrued expense of Rs. 20,000 and an accrued income of Rs. 15,000 while finalizing its year-end accounts. What is the net impact of this omission on the reported profit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Profit is overstated by Rs. 5,000
Explanation
Omitting the accrued expense of Rs. 20,000 overstates profit by 20,000. Omitting the accrued income of Rs. 15,000 understates profit by 15,000. The net effect is an overstatement of profit by Rs. 5,000.
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