If the cost of servicing a firm’s car was debited to a fixed asset account instead of being debited to the motor expenses account, then. . .?
Select ONE answer:
- gross profit would be overstated.
- net profit would be understated.
- expenses would be understated.
- net assets would be understated.
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 3
- Not correct – Gross profit would not be affected.
- Not correct – Net profit would be overstated.
- Correct – The total of expenses would be understated because the £200 motor expenses would be omitted from the list of expenses.
- Not correct – Net assets would be overstated.
This work is licensed under a Creative Commons Attribution 4.0 International License.
