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Good day Mr Moffat,
Sorry to ask this as this may be straight forward, but I am struggling to get my head around this concept.
After going through numerous mock exam questions, I have noticed that there are many questions asking “if £18000 paid for purchase of van had been debited to motor expense account” What adjustment would be needed etc?
Please explain the problems that will arise from such a misposting.
Many thanks as always
If they bought a van then it should appear as an asset in the Statement of financial position, and not as an expense in the Statement of profit or loss.
If they have by mistake debited motor expenses, then motor expenses appear in the Statement of profit or loss, which is wrong.
So to correct it they need to Cr motor expenses (to remove it because it should not be there) and Dr van account (to record it as an asset, which is what should have happened).
Thank you
Yes I see that.
I take from this that I would now increase the asset account by the amount misposted, in above example “£18000 and reduce profit if necessary by £18000”?
You would increase the asset amount.
You would increase the profit (because at the moment there is an expense that should not be there).
Dear Mr Moffat,
I have more of a practical question.
If expense accounts (temporary storage account) within a university require money to be transferred from one project to another, then I assumed I would Dr the account that is receiving and Cr account that is giving the funds.
But I have been told this is incorrect, do you know why?
If I have not provided enough information please let me know.
- The topic ‘Dr (Motor) Expense instead of debiting Current Asset (motor van) account’ is closed to new replies.