Answer to Question #183330 in Accounting for Milan

Question

What does it mean when you Understate your Cost of Goods Sold?

What does it mean when you Overstate your Cost of Goods Sold?

What does it mean when you Understate your Ending Inventory?

What does it mean when you Overstate your Ending Inventory?

What does it mean when you Overstate your Expenses?

What does it mean when you Understate your Expenses?

What does it mean when you Overstate your Current Assets?

What does it mean when you Understate your Current Assets?

What does it mean when you Overstate your Profit?

What does it mean when you Understate your Profit?

What does it mean when you Overstate your Assets?

What does it mean when you Understate your Assets?

Answer 1

Understate your Cost of Goods Sold, Overstate your Cost of Goods Sold: manipulation, which is expressed in:

• Allocating to inventory higher manufacturing overhead costs than those incurred
• Overstating discounts
• Overstating returns to suppliers
• Altering the amount of inventory in stock at the end of an accounting period
• Overvaluing inventory on hand
• Failing to write-off obsolete inventory.

Understate your Ending Inventory, Overstate your Ending Inventor: if costs are not included in inventory, then by default they must have been included in the cost of goods sold, inventory may be overstated, as it is not written off for the value of the goods sold.

Overstate your Expenses, Understate your Expenses: purchase of a more expensive product, and then return it and buy the same, but cheaper, excess on travel expenses: issue receipts showing more expensive ways of transportation or accommodation; by underestimation - the shortage of raw materials is not written off.

Overstate your Current Assets, Understate your Current Assets: accounts receivable are revalued due to a lack of compensation for bad accounts, or are undervalued because the provision account does not accurately reflect what can be written off.

Overstate your Profit, Understate your Profit: all of the above will eventually lead to an overestimation or understatement of profit.

Overstate your Assets, Understate your Assets: incorrect calculation of the initial cost of fixed assets( in the direction of increase or decrease).

All overstatements or understatements are fraudulent actions or errors due to ignorance of accounting rules.