- This topic has 3 replies, 1 voice, and was last updated 2 years ago by .
Viewing 4 posts - 1 through 4 (of 4 total)
Viewing 4 posts - 1 through 4 (of 4 total)
- You must be logged in to reply to this topic.
Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>
Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>
Forums › FIA Forums › FA2 Maintaining Financial Records Forums › Effect of prepayment on net profit
Q. After completing his final accounts, Kevin found that he has understated a prepayment.
How are Kevin’s net profit and capital affected by the correction of error?
Net Profit Capital
A. Increased Increased
B. Increased Decreased
C. Decreased Increased
D. Decreased Decreased
A prepayment says that some of the payment is in respect of the next year. Therefore that would increase this year’s profits.
If you make more profit capital must be higher (ie think of the prepayment as an asset).
Answer A is correct.
Thank you.
its help a lot thanks