Question

Which one of the following tactics of manipulation of accounts is going to result in understating of profit?

1 point

Showing fictitious purchase

Under valuation of opening stock

Charging less depreciation on assets

Over-valuation of closing stock​

Answer 1

under valuation of opening stock

Answer 2

Undervaluation of opening the stock is the tactics of manipulation of accounts is going to result in understating of profit.

• An undervalued stock is defined as a stock that is selling at a price, particularly below what is assumed to be its intrinsic value or true value.
• For example, if a stock is selling for $100, but it is worth $200 based on the predictable future cash flows then it is an undervalued stock.
• Overvaluation of opening stock in financial accounting results in decreasing the financial accounts profit for the company.
• Overvalued opening inventory means understated profit and undervalued opening inventory means high profit.

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