# Adjustments to Profit and Suspense Accounts (part a)

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1. Sir, your lecture was really amazing. I’ve really understood now and i have gained knowledge. Thank you

Kind regards.

2. says

Sir I don’t understand why your didn’t add 2000 to the profit as the goods still alison’s goods. I though as the bookkeeper considered a sale, he removed in stock and we should resend it in s and increase the profit.

• says

I do explain this in the lecture!

The inventory needs increasing by 2000, the same needs removing (2400) and so the net effect on the profit is to reduce it by 400.

3. says

great lecture but I am unsure of the last part which was if \$500 for electricity had been incorrectly credited to telephone. Why due to this would you need to adjust by \$1000?
Kind regards

• says

If we pay \$500 for electricity we should debit the expense account.

Here it has obviously gone to the wrong account – that would not stop the trial balance balancing except that instead of debiting they have credited.

So……we need to debit telephone 500 to remove it from that account.
We also need to debit electricity 500 to make things correct.
In total it means we need to adjust by 1000.

• says

Hello sir.Thank you for this amazing lecture.
However,am still not getting this part.I understood the what you explained about the \$1000.But the \$500 that we wrongly credited,did it affect our profit?
I thought that our profit would decrease by \$500 only because our expense is actually increasing by \$500 only,the other \$500 is just to correct the error.
Because if initially itself we had correctly recorded the entry,wouldn’t have the expense been only \$500?

• says

Because the 500 has been credited to telephone, it would have made the telephone expense lower, which would have increased the profit.

So we remove it from telephone – the expense is higher and the profit lower by 500.
Then we charge it to electricity (debit) and that makes the electricity expense higher, and therefore the profit lower by another 500.

So total affect on profit is 1,000.

• says

Thank you so much sir.I understood it now.
Thanks again!