An overstatement in the value of closing stock overstates all of the following except
A. Net income
B. Current assets
C. Capital of the business
D. Cost of goods sold
Answer: Option D
Solution(By Examveda Team)
An overstatement in the value of closing stock overstates all of the following except Cost of goods sold.This Question Belongs to Commerce >> Accounting
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why not affect on COGS ? ..when closing stock overstated , it means that this equation will be affected
opening +purchase-cloing =COGS ..which mean decrease on COGS value and as a result ,increase in Gross profit ...why thi not affect on COGS according to your answer ?
We calculate cost of goods sold using the equation :
COGS = Purchases + Opening stock -closing stock
As per this equation , when closing stock is overstated , the cost of goods sold would be aatected.