Accounting for IGCSE & O level - Accounting Procedures (Section 11 - No. 21)
If a business's profit is understated due to incorrect accounting procedures, what impact would that have on owner's perception of the business?
The owner may take less risk in an attempt to reduce losses.
The owner may be enabled to fund the business more.
The owner may believe they have a healthy cash flow.
The owner may invest more.
Explanation
Incorrect recording may persuade the owners to reduce risk. Understated profit will make the business looks less healthy and more risky.
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