If a company mistakenly counts more items during a physical inventory than actually exist, how will the error affect their bottom line?
A) no change to net income
B) net income will be overstated
C) net income will be understated
D) only gross profit will be affected

Question

Quizplus · Accepted Answer

If a company mistakenly counts more items during a physical inventory than actually exist, the inventory on the books will be overstated. This results in an overstatement of the cost of goods sold, which leads to an overstatement of expenses and a corresponding understatement of net income.

If a Company Mistakenly Counts More Items During a Physical