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Question

While finalizing the current year's profit, the company realized that there was an error in the valuation of closing Inventory of the previous year. In the previous year, closing Inventory was valued more by 50,000. As a result:

A Previous year's profit is overstated and current year's profit is also overstated Correct Answer Incorrect Answer
B Previous year's profit is overstated and current year's profit is understated Correct Answer Incorrect Answer
C Previous year's profit is understated and current year's profit is also understated Correct Answer Incorrect Answer
D Previous year's profit is understated and current year's profit is overstated Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Previous year's profit is overstated and current year's profit is understated

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