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Could someone help me with this? Thank you in advance!
When completing his final accounts, James found that he had overstated a year end accrual.
How are James’ net profit and capital affected by the correction of the error?
Net Profit. Net Assets
Increased. Increased
Increased. Decreased
Decreased. Increased
Decreased. DecreasedThe accruals are too high and therefore the expense is too high.
So correcting it will reduce the expense which will mean an increase in the profit.The accruals are too high and so the liabilities are too high.
So correcting it will reduce the liabilities which will increase the net assets.Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers.
Also, have you watched my free lectures? They are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Thank you so much sir! Also sir, how do we know from this question whether it’s an accrued expense or accrued income? They haven’t specified anything in the question.
Yes. I’ve been watching your lectures and they’re of great help to me!
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