A related party relationship can affect the profit and loss of an entity.

Question

Quizplus · Accepted Answer

Related party transactions may not be carried out on an arm's length basis, which can result in higher costs or lower revenue for the entity, thereby impacting its profit and loss. Additionally, related parties may engage in transactions that do not reflect normal market conditions, leading to distortions in the financial performance of the entity. Therefore, it is essential to disclose related party transactions and their impact on the financial statements.

A Related Party Relationship Can Affect the Profit and Loss