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Dear sir,
Inventory of stationery at the end of the period of $240 had been ignored
Requirement : correct the errorIn textbook, we have answer as following :
Dr Inventory of stationery 240
Cr Stationery expense 240I don’t understand the credit entry why we Credit to stationery expense but not sth else
Please explain for me.
Thanks in advance.When you buy the stationery you debit stationery expense and credit cash.
However in the Statement of profit or loss we only want to show the cost of the stationery actually used. So if there is inventory at the end, then credit stationery expense (which reduces this years expense) and debit inventory (so we have the asset for the Statement of financial position).
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