Definition of Overstated
When an accountant uses the term overstated, it means two things: The reported amount is incorrect, and. The reported amount is more than the true or correct amount.
What is an overstated expense?
- Overstated expenses are those items incurred as legitimate business expenses, but are over-claimed by the employee. Receipts are altered or created to support the expense actually spent but for amounts exceeding the actual payment by the employee.
What happens when you overstate expenses?
If you overstate sales or understate expenses, you'll pay more income tax than necessary. To understand why, you must be familiar with how an income statement works. In some cases, financial misstatements are due to errors or incomplete information.
