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The beginning stock of the current year is overstated by Rs. 500 and closing stock is overstated by Rs. 1200. Effect on profit:
- a)Rs. 1700 (overstated)
- b)Rs. 1200 (understated)
- c)Rs. 1700 (understated)
- d)Rs. 700 (overstated)
Correct answer is option 'D'. Can you explain this answer?
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The beginning stock of the current year is overstated by Rs. 500 and c...
Effect of Overstating Beginning Stock and Closing Stock on Profit
Explanation:
Overstating the beginning stock and closing stock will have an impact on the calculation of cost of goods sold (COGS) and gross profit.
Impact on COGS:
COGS is calculated as Beginning Stock + Purchases - Closing Stock. If the beginning stock is overstated, it will lead to an increase in COGS, and if the closing stock is overstated, it will lead to a decrease in COGS.
Impact on Gross Profit:
Gross profit is calculated as Sales - COGS. If COGS is overstated due to an overstated beginning stock or understated closing stock, it will lead to a decrease in gross profit.
Answer:
In this case, the beginning stock is overstated by Rs. 500 and closing stock is overstated by Rs. 1200.
Impact on COGS:
COGS = Beginning Stock + Purchases - Closing Stock
Overstated Beginning Stock = Rs. 500
Overstated Closing Stock = Rs. 1200
COGS = Rs. 500 + Purchases - Rs. 1200
COGS is understated by Rs. 700 (Rs. 1200 - Rs. 500)
Impact on Gross Profit:
Gross Profit = Sales - COGS
Assuming Sales remain the same,
Gross Profit is overstated by Rs. 700.
Therefore, the correct answer is option 'D' - Rs. 700 (overstated).
Explanation:
Overstating the beginning stock and closing stock will have an impact on the calculation of cost of goods sold (COGS) and gross profit.
Impact on COGS:
COGS is calculated as Beginning Stock + Purchases - Closing Stock. If the beginning stock is overstated, it will lead to an increase in COGS, and if the closing stock is overstated, it will lead to a decrease in COGS.
Impact on Gross Profit:
Gross profit is calculated as Sales - COGS. If COGS is overstated due to an overstated beginning stock or understated closing stock, it will lead to a decrease in gross profit.
Answer:
In this case, the beginning stock is overstated by Rs. 500 and closing stock is overstated by Rs. 1200.
Impact on COGS:
COGS = Beginning Stock + Purchases - Closing Stock
Overstated Beginning Stock = Rs. 500
Overstated Closing Stock = Rs. 1200
COGS = Rs. 500 + Purchases - Rs. 1200
COGS is understated by Rs. 700 (Rs. 1200 - Rs. 500)
Impact on Gross Profit:
Gross Profit = Sales - COGS
Assuming Sales remain the same,
Gross Profit is overstated by Rs. 700.
Therefore, the correct answer is option 'D' - Rs. 700 (overstated).
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Community Answer
The beginning stock of the current year is overstated by Rs. 500 and c...
The net effect on profit will be 700....because expenses side of trading account has been increased by 500 while income side has increased by 1200. so,the net effect on profit will be their difference..I.e.,700
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The beginning stock of the current year is overstated by Rs. 500 and closing stock is overstated by Rs. 1200. Effect on profit:a)Rs. 1700 (overstated)b)Rs. 1200 (understated)c)Rs. 1700 (understated)d)Rs. 700 (overstated)Correct answer is option 'D'. Can you explain this answer?
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The beginning stock of the current year is overstated by Rs. 500 and closing stock is overstated by Rs. 1200. Effect on profit:a)Rs. 1700 (overstated)b)Rs. 1200 (understated)c)Rs. 1700 (understated)d)Rs. 700 (overstated)Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The beginning stock of the current year is overstated by Rs. 500 and closing stock is overstated by Rs. 1200. Effect on profit:a)Rs. 1700 (overstated)b)Rs. 1200 (understated)c)Rs. 1700 (understated)d)Rs. 700 (overstated)Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The beginning stock of the current year is overstated by Rs. 500 and closing stock is overstated by Rs. 1200. Effect on profit:a)Rs. 1700 (overstated)b)Rs. 1200 (understated)c)Rs. 1700 (understated)d)Rs. 700 (overstated)Correct answer is option 'D'. Can you explain this answer?.
The beginning stock of the current year is overstated by Rs. 500 and closing stock is overstated by Rs. 1200. Effect on profit:a)Rs. 1700 (overstated)b)Rs. 1200 (understated)c)Rs. 1700 (understated)d)Rs. 700 (overstated)Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The beginning stock of the current year is overstated by Rs. 500 and closing stock is overstated by Rs. 1200. Effect on profit:a)Rs. 1700 (overstated)b)Rs. 1200 (understated)c)Rs. 1700 (understated)d)Rs. 700 (overstated)Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The beginning stock of the current year is overstated by Rs. 500 and closing stock is overstated by Rs. 1200. Effect on profit:a)Rs. 1700 (overstated)b)Rs. 1200 (understated)c)Rs. 1700 (understated)d)Rs. 700 (overstated)Correct answer is option 'D'. Can you explain this answer?.
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