Correction of errors effects

If Sales are overstated, the effect on Net Income is ____.

Overstated

If Cost of Sales is overstated, the effect on Net Income is ____.

Understated

If Expenses are overstated, the effect on Net Income is ____.

Understated

The relationship between Sales and Net Income errors is ____.

Direct

The relationship between Cost of Sales and Net Income errors is ____.

Inverse

The relationship between Expenses and Net Income errors is ____.

Inverse

If Sales are overstated, what is the effect on Cost of Sales?

Overstated

If Cost of Sales is overstated, what is the effect on Cost of Sales itself?

Overstated

If Expenses are overstated, what is the effect on Cost of Sales?

Understated

If Beginning Inventory is overstated, the effect on Cost of Sales is ____.

Direct

If Net Purchases are overstated, the effect on Cost of Sales is ____.

Direct

If Ending Inventory is overstated, the effect on Cost of Sales is ____.

Inverse

When Beginning Inventory increases, what happens to Cost of Sales?

It increases

When Ending Inventory increases, what happens to Cost of Sales?

It decreases

Working Capital is computed as ____.

Current Assets minus Current Liabilities

Working Capital represents the capital used for ____.

Day-to-day operations

A higher Working Capital means a business has ____.

Better liquidity

If Current Assets are overstated, the effect on Working Capital is ____.

Overstated

If Current Liabilities are overstated, the effect on Working Capital is ____.

Understated

The relationship between Current Assets and Working Capital is ____.

Direct

The relationship between Current Liabilities and Working Capital is ____.

Inverse