Multiple choice

If the closing stock during a particular period is understated by Rs. 15,500 while the opening stock is overstated by Rs. 20,500, then profits are

  1. overstated by Rs. 36,000

  2. understated by Rs. 36,000

  3. overstated by Rs. 5,000

  4. understated by Rs. 5,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When closing stock is understated, profit is reduced by Rs. 15,500 and opening stock overstated by Rs. 20,500 further reduces the profits by Rs. 20,500. Thus, overall profit is understated by Rs. 36,000.

Keep practicing — related questions