Asked by Nyiah Smith on May 06, 2024
Verified
If a company mistakenly counts more items during a physical inventory than actually exist, how will the error affect their bottom line?
A) no change to net income
B) net income will be overstated
C) net income will be understated
D) only gross profit will be affected
Physical Inventory
A count of all the physical goods and materials in stock at a business, used to verify records and account balances.
Net Income
The remaining profit for a company after subtracting total expenses, taxes, and costs from its total income.
Items Count
A measure or total of individual things or components.
- Investigate how mistakes in inventory influence financial disclosures.
Verified Answer
AC
Andrew CamiloMay 09, 2024
Final Answer :
B
Explanation :
If a company mistakenly counts more items during a physical inventory than actually exist, it will result in an overstatement of inventory. This will lead to an overstatement of cost of goods sold and an understatement of expenses, ultimately resulting in an overstatement of net income.
Learning Objectives
- Investigate how mistakes in inventory influence financial disclosures.
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