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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.
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.
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
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.