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QUESTION 20
After Toni prepared her draft accounts she discovered that she had incorrectly classified an
item of revenue expenditure as capital expenditure.
When the error is corrected, how will her net profit and capital be affected?
Net profit Capital
A Increased Reduced
B Reduced Increased
C Increased Increased
D Reduced ReducedI hope the answer is B, but I’m not sure. I think it has to be B or D because revenue expenditure needs to be increased and that would reduce profits. But Im not sure about the capital.
Anyone know for sure?
the available answer is D that means both got decreased. But actually i want somebody to give me the answer with reasoning.
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