Fundamentals of accounting -cpt

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asmita (Querist)
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20 January 2014 The opening stock is overstated by Rs 10,000
and closing stock understated by Rs.15,000.the impact of net profit on current year is

ANS Rs 25000 understated (can you just elaborate how?)

Ankit

Ankit (Expert)
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20 January 2014 Dear Asmita,

if the opening stock is undervalued, that mneans if you value it correctly, your expenses will come down.

if the closing stock is undervalued, that mneans if you value it correctly, your income will go up.

so all in all, your profit is understated by 25,000 (less income shown 15,000 - additional expense shown 10,000)

asmita

asmita (Querist)
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03 February 2014 Respected Sir,
a question arises again as to how opening stock is related to expenses and closing stock to income?

an asset purchased for rs 60000 and paid rs 10000 in remainig installments.this leads to both assets and liabilities increased by rs 50000? can you explain it please......