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Profit for a business was calculated as being $10,200. It was later discovered that capital expenditure of $3,000 had been treated as revenue expenditure, & revenue expenditure of $1,400 had been treated as capital exp.
What should have been the correct profit ?
Capital expenditure should appear in the Statement of financial position – not in the Statement of profit or loss. Revenue expenditure should appear in the Statement of profit or loss – not in the Statement of financial position.
So to get the correct profit, the capital expenditure of 3000 should be added back (because it should not have been charged) and the revenue expenditure of 1400 needs subtracting (because it should have been charged).
My answer to what you typed is correct.
Either BPP have made a mistake, or you have mistyped the question (are you sure it says revenue expenditure of $1400 and not revenue receipt of $1400 ??)
Then they are correct to add it 🙂
Revenue receipts appear in the Statement of profit or loss;
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