MGT101 GDB No 1 Solution Spring 2018
There was an error in the valuation of closing stock of the
previous year. In the previous year, the closing stock was valued more by Rs.
5,000. What will be its effect on current year’s profit? (Just mention whether
the current year’s profit will be overstated, understated or remains
unaffected).
previous year. In the previous year, the closing stock was valued more by Rs.
5,000. What will be its effect on current year’s profit? (Just mention whether
the current year’s profit will be overstated, understated or remains
unaffected).
Answer: Profit
will be understated in current year
will be understated in current year
Amount of Rs. 1,000
was paid as rent to Iqbal, but it was wrongly debited to a debtor Ihsan’s
account. What will be the effect of this error on arithmetical accuracy of
trial balance? (Just mention whether the arithmetical accuracy of trial balance
will be overstated, understated or remains unaffected).
Answer:
Remains
unaffected
Remains
unaffected
A revenue expenditure of Rs. 2,000 is treated as a capital
expenditure in the books of accounts. What will be the effect of this error on
Net profit? (Just mention whether the profit will be overstated, understated or
remains unaffected).
expenditure in the books of accounts. What will be the effect of this error on
Net profit? (Just mention whether the profit will be overstated, understated or
remains unaffected).
Answer:
Profit for the year will be
overstated
Profit for the year will be
overstated
What will be the correct amount of profit if the profit before the correction
of above errors is Rs. 40,000?
Answer:
40000+5000-1000-2000=42000
Profit
40000+5000-1000-2000=42000
Profit
