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sir cud u pls explain to me the difference between these 2 questions.why is the calculation different for both the questions.Thank You very much
1.A business statement of profit or loss and other comprehensive income for the year ended 31 dec 2004 showed a net profit of 83,600. It was later found that 18,000 paid for the purchase of a motor van had been debited to motor expenses account. It is the companys policy to depreciate motor vans at 25 % per year with a full years charge in the year of acquisiton.
what wud the profit be after adjusting this error.
Ans.51500 (65000+depr4500-18000)2.A companys statement of profit or loss for the year ended 31 dec 2005 showed a profit for the year of 65,000. It was later found that 18,000 paid for the maintenance to motor vehicles had been debited to motor vehicles at cost account. It is the companys policy to depreciate motor vans at 25 % per year with a full years charge in the year of acquisiton.
ans 97100 (83600+18000-depr 4500)In the first question, they have bought a non-current asset but recorded it an expense by mistake.
In the second question, they have paid an expense but recorded it as a non-current asset by mistake.
So the mistakes are the opposite way round from each other, which is why the way of correcting them is the opposite way round also.
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