At the end of a financial period, the trading profit and loss account of a company showed a profit of ₦120,000. It was however discovered that revenue of ₦1...
Assessment:JAMB UTME - Principles of Accounts - 1997Subject:Financial Accounting
At the end of a financial period, the trading profit and loss account of a company showed a profit of ₦120,000. It was however discovered that revenue of ₦12,000 was recorded as expenses while expenses of ₦4,000 had been recorded as revenue. What should be the correct profit for the period?
Answer Details
To find the correct profit for the period, we need to make the necessary adjustments to the profit figure shown in the trading profit and loss account. Since revenue of ₦12,000 was wrongly recorded as expenses, we need to add back that amount to the profit figure. Also, expenses of ₦4,000 were wrongly recorded as revenue, so we need to deduct that amount from the profit figure. Therefore, the correct profit for the period can be calculated as follows:
Trading profit and loss account profit: ₦120,000
Add back revenue wrongly recorded as expenses: ₦12,000
Deduct expenses wrongly recorded as revenue: ₦4,000
Correct profit for the period: ₦128,000
Therefore, the correct answer is: ₦128,000