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What is the effect of an overstatement of expenses on the final accounts of a so
What is the effect of an overstatement of expenses on the final accounts of a sole trader?
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What is the effect of an overstatement of expenses on the final accounts of a sole trader?
Increased profit
Decreased profit
No effect on profit
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An overstatement of expenses will lead to a decreased profit in the final accounts.
Questions & Step-by-step Solutions
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Q: What is the effect of an overstatement of expenses on the final accounts of a sole trader?
Solution:
An overstatement of expenses will lead to a decreased profit in the final accounts.
Steps: 5
Show Steps
Step 1: Understand what expenses are. Expenses are costs that a sole trader incurs while running their business.
Step 2: Know what overstatement means. Overstatement means reporting a higher amount than what is actually true.
Step 3: Realize that if expenses are overstated, it means the sole trader is saying they spent more money than they really did.
Step 4: Understand that profit is calculated by subtracting total expenses from total income. If expenses are higher, profit will be lower.
Step 5: Conclude that an overstatement of expenses will show a decreased profit in the final accounts of the sole trader.
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