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When closing inventory is overstated net income for the accounting period will be understated is it true or false?
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When closing inventory is overstated net income for the accounting per...
True

Explanation:

  • Closing inventory is the value of goods that remain unsold at the end of the accounting period.

  • If the closing inventory is overstated, it means that the value of unsold goods is recorded at a higher amount than it actually is. This results in an overstatement of the assets of the business.

  • As a result, the cost of goods sold is understated, which means that the expenses of the business are also understated.

  • Net income is calculated by deducting the total expenses from the total revenue. Since the expenses are understated, the net income for the period will also be understated.

  • Therefore, when closing inventory is overstated, net income for the accounting period will be understated.

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When closing inventory is overstated net income for the accounting period will be understated is it true or false?
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