1.When closing stock is overstated, profit is overstated.
2.When Opening stock is overstated, profit is understated.
3.When closing stock is understated, profit is understated
4. When opening stock is underrstated, profit is overstated.
Pls explain how profit is overstated and understated when opening and closing stock is over and under stated.
And also some easy way to learn it as i am learning this but got confused always....
Thank You
For Learning purpose, treat Opening stock as an EXPENSE and Closing stock as your INCOME, so whenever Closing stock is overstated it means our income has been increased and vice versa. And if Opening stock has been overstated then it means your expenses are increased..obviously it means our profit is decreased ! GOT IT !
CCI
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CAclubindia
