PRC-1 · Chapter 8 · Question 26 of 100
An entity incorrectly understated its opening inventory by Rs. 10,000. What is the impact on the current year's profit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Profit is overstated by Rs. 10,000
Explanation
Opening inventory is added in the Cost of Sales calculation. Understating it makes Cost of Sales too low, which results in an overstated net profit for the year.
More Correction of Errors MCQs
- Q28The purchase day book was overcast by Rs. 2,500. What is the correcting journal entry?
- Q29A credit sale of Rs. 4,800 to Zaid was recorded in the sales day book as Rs. 8,400 and posted to the ledger accordingly. What is the…
- Q30The sales return day book was overcast by Rs. 1,200. What is the correcting journal entry?
- Q31Discount received of Rs. 600 was omitted from the Discount Received account in the general ledger, although it was correctly entered in…
- Q32Bank charges of Rs. 300 were completely omitted from the books. How does this affect the financial statements before correction?