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A Level Accounting (9706)•9706/13/M/J/25
Question 12 from 9706/13/M/J/25

Explanation

Correcting profit for accounting errors Steps:

  • Omitted wages 9,000meanexpensesunderstated,sosubtract9,000 mean expenses understated, so subtract 9,000meanexpensesunderstated,sosubtract9,000 from draft profit.
  • Discounts received 2,500omittedtodiscountsallowedaccountisambiguous;standardinterpretationtreatsitasrecordedasexpenseinsteadofincome,understatingprofitby2,500 omitted to discounts allowed account is ambiguous; standard interpretation treats it as recorded as expense instead of income, understating profit by 2,500omittedtodiscountsallowedaccountisambiguous;standardinterpretationtreatsitasrecordedasexpenseinsteadofincome,understatingprofitby5,000, so add $5,000.
  • Sales returns 8,000debitedtopurchasesreturnsaccounthasnetzeroeffectonprofit(salesoverstatedby8,000 debited to purchases returns account has net zero effect on profit (sales overstated by 8,000debitedtopurchasesreturnsaccounthasnetzeroeffectonprofit(salesoverstatedby8,000, expenses overstated by $8,000).
  • Net adjustment: 40,000−40,000 - 40,000−9,000 + 5,000+5,000 + 5,000+0 = $36,000.

Not enough information to reach $80,000, as error effects are ambiguous.

Final answer: Not enough information.

Topic: Preparation of financial statements

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