Accounting Multiple Choice Question – 24 September 2024

A gas accrual for £400 at the reporting date was treated as a prepayment in a sole trader’s financial statements.

As a result the profit was?

Select ONE answer:

1. Understated by £800
2. Understated by £400
3. Overstated by £800
4. Overstated by £400

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

1. Not correct
2. Not correct
3. Correct == > The accrual should have increased expenses by £400 but instead expenses were decreased by £400 leading to an overstatement of profit of £800.
4. Not correct

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