On reviewing the financial statements, the company’s accountant discovers that a payment of £21,000 made to a supplier has been incorrectly recorded in the cash book and in other internal accounting records as £31,000. What will be the effect on the income statement (profit and loss account) and statement of financial position (balance sheet) when this error is rectified?

(a) Profit before tax will decrease by £21,000 and trade payables (creditors) will increase by £21,000.

(b) Profit before tax will increase by £31,000 and trade payables (creditors) will increase by £31,000.

(c) Profit before tax will remain unchanged, asset of cash will decrease by £10,000 and trade payables (creditors) will decrease by £10,000.

(d) Profit before tax will remain unchanged, asset of cash will increase by £10,000 and trade payables (creditors) will increase by £10,000.