While finalizing accounts, an accountant completely omitted an accrued wage expense of Rs. 15,000 and a prepaid insurance asset of Rs. 10,000. What is the net effect of these two errors on the reported profit?

Correct answer: B) Profit is overstated by Rs. 5,000

Explanation

Omitting the accrued expense overstates profit by 15k. Omitting the prepaid expense understates profit by 10k (as the expense remains too high). The net effect is an overstatement of profit by 5k (+15k - 10k).