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    ngocanh's Avatar
    ngocanh Posts: 4, Reputation: 1
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    #1

    Aug 9, 2008, 12:24 AM
    Effect of errors on income statement
    I spend hours of trying to figure how different errors effecting income statement. Please let me know if I'm wrong. Thanks

    1. Understated ending inventory would cause understated income
    2. Overstated beginning inventory would cause understaed income
    3. understated purchase would cause overstated income
    4. understated depreciation expense would cause income overstated? :confused: I have hard time with depreciation... For instance, it is the most influence factor when calculating cash flow... so why when we calculating cash flow under direct method, depreciation expense is not included?
    delite's Avatar
    delite Posts: 202, Reputation: 3
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    #2

    Aug 11, 2008, 09:11 PM
    Your assumptions are bascillaly correct as best as I can for the parties invoved
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