Accounting for IGCSE & O level - Accounting Procedures (Section 18 - No. 45)
If a company *overstates* its revenue, what effect does this have on its financial statements?
Assets and liabilities will be understated.
Owner's equity will be overstated.
Expenses will be overstated.
Net income and cash flow will be unaffected.
Explanation
Overstating revenue will lead to an overstatement of net income, which increases owner's equity.
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