Upon reviewing the company’s financial records, it was found that certain errors from previous years remain uncorrected. Considering these, what is the effect on the net income reported for the year ending March 31, 2013? Details: i. Depreciation for 2011-2012 was understated by 7,000. ii. Accrued expenses as of March 31, 2013 were understated by 10,000.

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Net income is overstated by 7,000Net income is overstated by 10,000Net income is understated by 17,000Net income is overstated by 17,000No impact on net income

Explanation

The net income for the year ending March 31, 2013 is overstated by 10,000 because accrued expenses have been understated, thus expenses are understated and income is inflated. The understated depreciation relates to the prior year (2011-2012) and does not affect the current year's net income (2012-2013). Therefore, only the accrued expenses error impacts the current net income.