While finalizing the accounts, an accountant completely overlooked to record an accrued expense of Rs. 37,800 and an accrued income of Rs. 16,300. What is the net impact of these omissions on the reported profit?

Correct answer: B) Profit is overstated by Rs. 21,500

Explanation

Omitting the accrued expense overstates profit by Rs. 37,800. Omitting the accrued income understates profit by Rs. 16,300. The net effect is an overstatement of Rs. 21,500 (37,800 - 16,300).