A-LevelAccountingReconciliation and verification9706/12 · Feb/Mar 2023 · Q51 Mark
A business has incorrectly recorded a vehicle purchase as a vehicle repair. The business does not charge depreciation on assets in the year of purchase. What is the effect of this error on the financial statements?
Astatement of profit or loss: profit overstated; statement of financial position: assets overstated
Bstatement of profit or loss: profit overstated; statement of financial position: assets understated
Cstatement of profit or loss: profit understated; statement of financial position: assets overstated
Dstatement of profit or loss: profit understated; statement of financial position: assets understated
✓ Correct answer
D: statement of profit or loss: profit understated; statement of financial position: assets understated
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