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by Anonymous on October 22nd, 2008

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If ending inventory is overstated, net income will be overstated?

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Answers. 2 helpful answers below.

  • by fuzzygenius on October 22nd, 2008

    fuzzygenius

    Indeed. As the last answerer said, it will understate cost of goods sold, and so inflate net income. Hilariously enough, this will possibly increase your tax liability. I can think of a few edge cases where this would result in a substantial loss of money. Personally, that makes it better to understate, rather than overstate, inventory.

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  • by tifspald on October 22nd, 2008

    tifspald

    Yes, that is correct. Your cost of goods sold will be understated, resulting in an overstated net income figure.

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