Final answer:
The dual effect of a business returning £100 worth of goods bought on credit decreases both accounts payable and inventory in the company's books, impacting liabilities and assets respectively.
Step-by-step explanation:
The dual effect of a business returning £100 of goods they bought on credit involves both an accounting transaction and an impact on the company's cash flows. Firstly, the company's accounts payable will decrease because it returns goods that it had previously planned to pay for, reducing its liabilities. Secondly, the company's inventory will also decrease because the goods are sent back to the supplier, reflecting a reduction in assets.
This action can have broader implications. It affects the company's relationship with its suppliers and can influence its ability to manage inventory efficiently. Furthermore, it must be noted that the returned goods might also affect the company's profit margins if the goods are sent back due to defects or unsuitability for sale, which could lead to additional expenses or lost revenue.