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1. • CommentAuthorjagdeepgill
   • CommentTimeMay 4th 2007

    
   i am unable to understand questions of the type
   'if liabilities are undersated wat will happen to other things in the equation'
   i mean the questions relating to something understated or overstated....plz help
2. • CommentAuthorCounter
   • CommentTimeMay 5th 2007

    
   I substitute the words "too much" or "too high" for overstated; and "too little" or "too low" for understated.
   If liabilities are (overstated) TOO MUCH or TOO HIGH in the accounting equation, then either (1) Assets are TOO MUCH or TOO HIGH or (2) owner's equity is TOO LITTLE or TOO LOW.
   
   If expenses are overstated, net income is _____________. Restated: If expenses are TOO HIGH, then net income is TOO LOW or understated.
   
   If ending inventory is overstated (TOO HIGH), then the cost of goods sold is ________ . Answer is TOO LOW or understated.
   
   If ending inventory is overstated, then net income is _____________. If ending inventory is TOO HIGH, then the cost of goods sold is TOO LOW. If cost of good sold is too low, the profit is TOO HIGH. In the accounting equation, the assets will be TOO HIGH and owner's equity will be TOO HIGH. A = L + OE.
   
   Hope that helps.