Accounting Online Program Certification Practice Test

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Prepare for the Accounting Online Program Certification Test. Use flashcards and multiple choice questions with detailed explanations. Ace your accounting certification exam with confidence!

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How much will Yvette's profit for the year ended 31 March 20X0 be affected due to the error in recording?

Overstated by £36,100
Understated by £36,100
Unchanged
Overstated by £20,000

The correct answer is: Overstated by £36,100

In assessing how much Yvette's profit for the year ended 31 March 20X0 will be affected due to the error in recording, it is crucial to analyze the nature of the error and its impact on profit calculations. An overstatement in profit means that the reported profit figure is higher than the actual profit earned. The situation described suggests that an error led to an increased perception of profit by £36,100. This could arise from omitted expenses, incorrect revenue recognition, or other accounting discrepancies. For example, if certain expenses that should have been recorded were not, this reduction in expenses would consequently inflate profit figures. Therefore, when the error is corrected, the profit will be adjusted downwards, reflecting the true financial performance as it appears in the financial statements. Understanding these dynamics demonstrates why the profit is overstated by £36,100. Recognizing the specifics of the error helps clarify how it directly influences the profit amounts reported versus the actual economic reality of Yvette's business. This type of analysis is essential for maintaining accurate financial records and ensuring that stakeholders have a clear understanding of the business’s financial health.