A company's final accounts for the year ended 31st December, 2022 are as follows:

Trading Account:
Sales ₦200,000
Cost of Goods Sold ₦120,000
Gross Profit ₦80,000

Profit and Loss Account:
Gross Profit ₦80,000
Operating Expenses ₦40,000
Net Profit ₦40,000

Balance Sheet:
Capital ₦100,000
Retained Earnings ₦40,000
Total ₦140,000

What is the correct treatment for the following error in the final accounts?

The operating expenses were incorrectly debited to the trading account instead of the profit and loss account.

Question

A company's final accounts for the year ended 31st December, 2022 are as follows:

Trading Account:
Sales ₦200,000
Cost of Goods Sold ₦120,000
Gross Profit ₦80,000

Profit and Loss Account:
Gross Profit ₦80,000
Operating Expenses ₦40,000
Net Profit ₦40,000

Balance Sheet:
Capital ₦100,000
Retained Earnings ₦40,000
Total ₦140,000

What is the correct treatment for the following error in the final accounts?

The operating expenses were incorrectly debited to the trading account instead of the profit and loss account.

Accepted Answer

Debit the profit and loss account by ₦40,000 and credit the trading account by ₦40,000

Post Utme Abu 2017 Accounting Question 39