While taking a physical inventory, a company counts its inventory as less than the actual amount on hand. How will this error affect the income statement?

Physical Inventory

Physical inventory refers to the process of counting all the physical merchandise or stock in a store or warehouse to ensure data accuracy.

Income Statement

A financial statement that shows a company's revenues, expenses, and net income or loss over a specific period of time.

Actual Amount

Refers to the real, exact amount of financial transactions, differing from estimates or budgeted amounts.