Answer to Question #184785 in Accounting for Milan

Question

Can you please provide me an answer for each of the questions individually, not together. I really need a good and simple explanation for each. Thank you.

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

It is when the ending inventory is overstated.

The cost of goods sold is equal to the beginning inventory plus inventory purchases minus ending inventory. If you overstate ending inventory, your COGS will appear lower than it should be.

Overstatements of ending inventory result in understated cost of goods sold, overstated net income, overstated assets, and overstated equity.

When inventories are overstated it lowers the COGS, because the excess stock in accounting records translates to higher closing stock and less COGS.

When an accountant uses the term overstated, it means two things: The reported amount is incorrect, and. The reported amount is more than the true or correct amount.

When an accountant says that an amount is understated, it means two things: The amount is not the correct amount and the amount is less than the true amount. In other words, the amount is too small.

If an account or a figure on an account is overstated, the amount that is reported on the financial statement is more than it should be.

An understatement in accounting refers to business assets given a valuation lower than their fair market value or a devaluation of liabilities to less than their actual cost.

When an accountant uses the term overstated, it means two things: The reported amount is incorrect and the reported amount is more than the true or correct amount.

When an accountant says that an amount is understated, it means two things: The amount is not the correct amount and the amount is less than the true amount.

If an account or a figure on an account is overstated, the amount that is reported on the financial statement is more than it should be.

Is a situation where a business assets given a valuation lower than their fair market value or a devaluation of liabilities to less than their actual cost.