Neco 2020 Financial Accounting Question 40

Practice objective / multiple choice question 40 from the 2020 Neco Financial Accounting examination.

Neco 2020 Financial Accounting Objective / Multiple Choice Medium Difficulty
Question 40 NECO • 2020 • FINANCIAL_ACCOUNTING • objective

During posting, a purchase of office supplies costing \(\text{₦}15,000\) was mistakenly debited to Office Supplies Expense instead of Office Supplies (asset). The trial balance still balances. Explain the effect of this error on the profit for the period and state the correcting entry required.

Answer Options

A. Profit is understated by \(\text{₦}15,000\); correct by debiting Office Supplies Expense \(\text{₦}15,000\) and crediting Office Supplies \(\text{₦}15,000\).
B. Profit is overstated by \(\text{₦}15,000\); correct by debiting Office Supplies Expense \(\text{₦}15,000\) and crediting Office Supplies \(\text{₦}15,000\).
C. Profit is unchanged; correct by debiting Office Supplies \(\text{₦}15,000\) and crediting Cash \(\text{₦}15,000\).
Correct Answer D. Profit is understated by \(\text{₦}15,000\); correct by debiting Office Supplies \(\text{₦}15,000\) and crediting Office Supplies Expense \(\text{₦}15,000\).
Correct Answer
D
Correct Option:
Profit is understated by \(\text{₦}15,000\); correct by debiting Office Supplies \(\text{₦}15,000\) and crediting Office Supplies Expense \(\text{₦}15,000\).

About This Question

This is Neco 2020 Financial Accounting Question 40. It is one of the objective questions from the 2020 Neco Financial Accounting examination.

Difficulty level: Medium .

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