Assertion (A): Increasing the value of closing inventory increases profit. Reason (R): Increasing the value of closing inventory reduces cost of goods sold. In the context of the above two statements, which of the following is correct?

Question

KollegeApply · Accepted Answer

Both (A) and (R) are correct and (R) is the correct reason of (A). Explanation: Closing inventory is deducted while calculating Cost of Goods Sold. If closing stock value increases, the cost of products sold decreases, resulting in increased gross profit and net profit. As a result, both assertion and reasoning are correct, and reasoning accurately explains assertion.

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