A-LevelAccountingThe accounting cycle9706/12 · Oct/Nov 2019 · Q121 Mark

A sole trader's personal expenses had been paid out of the business bank account and included in his income statement. What was the effect of this on the profit and capital?

Aprofit: no effect, capital: no effect

Bprofit: no effect, capital: overstated

Cprofit: understated, capital: no effect

Dprofit: understated, capital: understated

✓ Correct answer

C: profit: understated, capital: no effect

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Topic: The accounting cycle, A-Level Accounting (syllabus 9706). Multiple choice, 1 mark.
Source: A-Level Accounting, Oct/Nov 2019 Paper 1 Variant 2, question 12.

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