Dear Irfan
Any impact on the balance sheet or income statement
has a chained reaction because of double entry
system. In your example
a. Any impact on profit will affect the profit
available for distribution which will affect the
shareholders equity. Furthermore it will also affect
the cash flow. Please note that the effect could be
both positive as well as negative depending on impact
on profit. It is common accounting rule is that each
and every transaction will either affect balance sheet
and cash flow statement or can affect all the three
basic statements (statement of changes in owners
equity is an extension of n\balance sheet.
2. Regarding the second question not necessarily it
will affect the efficiency.
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