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What is the effect on net profit if opening stock is undervalued?
Wiki User
∙ 13y ago
If Opening Stock is undervalued, this will result in your Cost of Sales being understated and therefore Gross and Net Profit being overstated.
Of course, since Opening Stock in this period is the last period's Closing Stock, this would mean that Closing Stock in the last period was understated too, meaning that Net Profit in the last period was understated.
That doesn't make it OK though!
Wiki User
∙ 13y ago
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What effect does an overstatement of inventory have on a company's financial statements?
Overstatement of closing stock will inflate profit and overstatement of opening stock will have an inverse effect.
Opening stock minus closing stock?
profit or loss
How do you get the closing stock in trading profit and loss when not given?
How do I find the opening stock when given the closing stock
If closing stock increases how will it effect net profit?
net profit will increase
What will be the effect of decrease in closing stock on gross profit?
i think Gross profit Will decrease
How will you find closing stock in trading and profit and loss account?
GROSS PROFIT = SALES - [OPENING STOCK + PURCHASES + DIRECT EXPENSES - CLOSING STOCK]... substitute if u have all the other values
What is the effect of closing stock on net profit?
A business remaining stock at the end of an accounting period is known as closing stock. It may include the finished goods, raw material and work in process and it is also deducted from the periods costs in the balance sheet. however sales in the trading a/c do have an effect on the gross profit and hence in the profit and loss a/c for the net profit. An increase or decrease in closing stock will have an effect on the net profit..if closing stock increase the gross profit will increse and vice versa. As the gross profit will increase the firm will able to deduct more expenses from it and hence the remaining will be the net profit.( increase)
Can you give me some hot tips regarding undervalued stock?
what is a broker?
What is effect on profit Previous year forget closing stock for next year profit?
previous year profit under stated and present year profit understated
Under stock and debtors system branch profit is ascertained by opening?
branch P/L a/c
Which are the most important accounting ratios and indicators?
Gross Profit Margin:(Gross Profit / Sales) x 100 = ______%Net Profit Margin:(Net Profit / Sales) x 100 = _____%Stock Turnover RatioCost of Goods Sold / Average Stock = ______ timesCost of Goods Sold = Sales - Gross ProfitAverage Stock = Opening Stock + Closing Stock / 2If opening stock is not given treat closing stock as opening stockDebtor Collection Period(Debtors / Sales) x 365 = ______ daysCreditor Payment Period(Creditors / Purchases) x 365 = _________daysReturn on Capital Employed(Net Profit / Capital) x 100 = _________%Current RatioCurrent Assets / Current Liabilities = ____:____Quick Ratio/Acid Test RatioCurrent Assets - Stock / Current LiabilitiesCurrent Assets = Cash/Bank + Debtors + PrepaymentsCurrent Liabilities = Creditors + Overdrafts Accruals
How do you work out a gross profit percentage?
gross profit divided by sales Sales = 250000 Cost = 100000 gross profit = 150000 150000 / 250000 = 60%
