Error Correction: Returns Inward and Carriage Inwards Both Reduce Profit Equally

Steps:

• Returns inward ($180) is a deduction from sales, reducing gross profit by$180.
• Carriage inwards ($180) is a direct expense, reducing net profit by$180.
• The error recorded the $180 as an expense instead of a sales deduction, but both lower profit identically.
• Correction debits returns inward (reduces profit by $180) and credits carriage inwards (increases profit by$180), netting zero change.

Why D is correct:

• Under double-entry accounting, both items are contra-revenue or expense entries that decrease profit by the same amount, so reclassification has no net effect.

Why the others are wrong:

• A: Correction balances the profit reduction, not decreasing it further.
• B: No net increase occurs as the profit deduction persists equally.
• C: No double adjustment amplifies profit.

Final answer: D