Accounting for IGCSE & O level - Accounting Procedures (Section 16 - No. 1)
In the context of error correction, if an expense has been omitted, what is the effect on the profit and financial position?
Profit is overstated and total assets are unaffected.
Profit is understated and total liabilities are understated.
Profit is overstated and total liabilities are unaffected.
Profit is understated and total assets are overstated.
Explanation
Omitting an expense leads to an overstatement of profit and does not affect the asset total, but does affect the liabilities.
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