On reviewing the financial statements, the company's accountant discovers that a payment of £21,000 made to a supplier has been incorrectly recorded in the cash book and in other internal accounting records as £31,000. What will be the effect on the income statement (profit and loss account) and statement of financial position (balance sheet) when this error is rectified? a) Profit before tax will remain unchanged, asset of cash will decrease by £10,000 and trade payables (creditors) will decrease by £10,000 b) Profit before tax will decrease by £21,000 and trade payables (creditors) will increase by £21,000 c) Profit before tax will remain unchanged, asset of cash will increase by £10,000 and trade payables (creditors) will increase by £10,000 d) Profit before tax will increase by £31,000 and trade payables (creditors) will increase by £31,000

On reviewing the financial statements, the company's accountant discovers that a payment of £21,000 made to a supplier has been incorrectly recorded in the cash book and in other internal accounting records as £31,000. What will be the effect on the income statement (profit and loss account) and statement of financial position (balance sheet) when this error is rectified? a) Profit before tax will remain unchanged, asset of cash will decrease by £10,000 and trade payables (creditors) will decrease by £10,000 b) Profit before tax will decrease by £21,000 and trade payables (creditors) will increase by £21,000 c) Profit before tax will remain unchanged, asset of cash will increase by £10,000 and trade payables (creditors) will increase by £10,000 d) Profit before tax will increase by £31,000 and trade payables (creditors) will increase by £31,000

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter2: Analyzing Transactions

Section: Chapter Questions

Problem 5PA: The Colby Group has the following unadjusted trial balance as of August 31, 2019: The debit and...

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