Correction of errors

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March 5, 2018 at 9:23 pm #440484
miracle657
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The draft financial statements of Galahad’s business for the year ended 31 July 20X0 show a profit of $54250 prior to the correction of the following errors: 1.Cash drawings of $250 have not been accounted for 2.Debts amounting to $420, which were provided against in full during the year, should have been written off as irrecoverable
3.Rental income of $300 has been classified as interest receivable A 53580 B 53830 C 54250 D 55130
Correct answer is C..But my answer is B because of $420 irrecoverable ecpense..Sir, why $420 expense doesnt affect to the profit as correct answer is C?
March 6, 2018 at 7:30 am #440526
John Moffat
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The debts were provided for during the year, and so there would already be the expense of 420 in creating the provision.
They should have been written off instead, but the expense would still remain as 420 and make no difference to the profit.
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