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WAEC Financial Accounting 2017 Question 10

Question 10

Final Accounts of a Sole Trader

The effect on profit when the closing stock is understated is

  1. A.increase in profit.
  2. B.decrease in profit.
  3. C.no change in profit.
  4. D.appropriation of profit.
Show the answer and explanation

Answer: B (decrease in profit.)

Explanation

A lower closing stock raises cost of sales, so gross and net profit fall.