Question

Current year's profit is understated, when
(a) only current year's closing inventory is understated
(b) only current year's opening inventory is overstated
(c) both (a) and (b) above
(d) none of (a) and (b) above
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Answer 1

Answer:

your answer is

Step-by-step explanation:

ANSWER

In case of overstatement of closing stock in previous year the profit of the previous year is overstated and the profit of the current year is understated. In previous year the cost of goods sold is reduced by 50,000 there by increasing the gross profit ( sale - COGS) and in the current year closing stock of previous year is the opening stock of current year there by increasing the Cost of goods sold and reducing the profits.

Answer 2

Answer:

When closing stock in the prior year is inflated, both the prior year's profit and the current year's profit are overblown.

Step-by-step explanation:

What is meant by Current year's profit?

When closing stock in the prior year is inflated, both the prior year's profit and the current year's profit are overblown.

The revenue a company makes during the current reporting period is referred to as current year net income. The amount is determined by deducting all current-year expenses from revenues.

The term "current year" refers to the fiscal year, which is the fiscal year immediately before the budget year, in which a budget is produced and accepted.

For purposes of a specific tax, the term "current tax year" refers to the calendar year during which the initial tax payment is due, less any extensions granted according to section 323.17 of the Revised Code.

Therefore, the correct answer is option (c) both (a) and (b) above.

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