Question
1a. How would the overstatement of inventory affect assets? (Which specific asset would it affect and in which direction?) 1b. How would the understatement of
1a. How would the overstatement of inventory affect assets? (Which specific asset would it affect and in which direction?)
1b. How would the understatement of inventory affect assets? (Which specific asset would it affect and in which direction?)
2a. How would the overstatement of inventory affect liabilities?
2b. How would the understatement of inventory affect liabilities?
3a. How would the overstatement of inventory affect a permanent owners equity account? (Which specific owners equity account would it affect and in which direction?)
3b. How would the understatement of inventory affect a permanent owners equity account? (Which specific owners equity account would it affect and in which direction?)
Hint: For each question be sure to say whether the inventory error (overstatement or understatement) would increase or decrease the accounting element, or have no impact at all. If the error would increase or decrease the element, be sure to say which specific account the error increases or decreases. For Question 1a, for instance, you might say something like, An overstatement of inventory increases assets, specifically the Merchandise Inventory account.
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Using Financial Accounting Information The Alternative to Debits and Credits
Authors: Gary A. Porter, Curtis L. Norton
7th Edition
978-0-538-4527, 0-538-45274-9, 978-1133161646
