Question 8 - 7707/12/M/J/22 | mMCQ.me

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Question 8 - 7707/12/M/J/22 | mMCQ.me

O Level Accounting (7707)•7707/12/M/J/22

Question 8 from 7707/12/M/J/22

Explanation

Correcting Omitted and Misclassified Non-Current Asset Purchases

Steps:

Omitted machine: Record purchase as debit machine (non-current asset) $5000, credit bank (current asset)$ 5000; non-current assets + $5000, w o r k i n g c a p i t a l u n c h a n g e d n e t b u t c u r r e n t a s s e t s$ 5000.

Why C is correct:

Aligns with double-entry principle: Asset corrections boost non-current assets by full purchase values while machine's cash outflow reduces working capital by $5000.

Why the others are wrong:

A: Omits machine from asset increase and misstates working capital effect as "no effect 5000."
B: Corrects asset total but ignores $5000 working capital decrease from bank.
D: Incomplete; specifies asset increase but omits working capital impact.

Final answer: C

Topic: Correction of errors

Practice more O Level Accounting (7707) questions on mMCQ.me

-

5000, working capital unchanged net but current assets -

5000, w or kin g c a p i t a l u n c han g e d n e t b u t c u rre n t a sse t s -

Misrecorded vehicle: Originally debited repairs (expense)

15000, credit bank

15000; correct by debit motor vehicle (non-current asset)

15000, credit repairs

15000; non-current assets +$15000, no current asset change.

Total non-current assets: Increase by

20000 (

5000 + $15000).

Working capital: Decreases $5000 from machine's bank reduction; vehicle correction affects only equity via expense reversal.