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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Inventory count
Hi sir
I am doing a question from OT revision, There is a question : During a physical inventory count, one section of inventory is counted twice , what will be impact?
Correct answer is Inventory will be overstated and GP will be overstated as well,
There is an other option which says- Inventory is overstated and COGS is overstated ..
Why not the second option?
i don’t understand the impact on COGS and on GP.
Sales – COGS = Profit
COGS = Opening inventory + Purchases – Closing inventory
If closing inventory is overstated (e.g. due to double counting), COGS is UNDERstated. That is why profit is overstated.
(Put some numbers in if you need convincing.)
Thnaks
You’re welcome!