Question

# After the preparation of income statement, it was discovered that accrued expenses of 1,000 have been ignored and closing inventory has been overvalued by 1,300. This will have result in:

A
An understatement of net profit of Rs 2,300
B
An overstatement of net profit of Rs 300
C
An understatement of net profit of Rs 300
D
An overstatement of net profit of Rs 2.300

Solution

## The correct option is D An overstatement of net profit of Rs 2.300If accrued expenses of Rs $$1,000$$ have been ignored this will increase the net profit by Rs. $$1,000$$. If closing inventory is overvalued, it will also result in increasing the net profit by Rs. $$1 ,300$$. Thus, net effect will be profit increased by Rs. $$2,300 (1000+1300)$$.Mathematics

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