- This topic has 1 reply, 2 voices, and was last updated 7 years ago by
.
- Posts
Sir can you please explaint the task 4 for me.
I can’t understand the answer of the book. why irrecoverable debts is DR but depreciation adjustment and inventory adjustment are CR. they are sort of expences for me.Depreciation is indeed an expense. However task 4 is referring to the adjustments needed as a result of task 1 and task 2.
From task 1, the inventory was valued more than it should have been. So the value is reduced, which reduces the profit and therefore reduces the retained earnings – so debit retained earnings.
From task 2, the depreciation charge was too high and so needs reducing. Lower depreciation means more profit and therefore more refined earnings – so credit retained earnings.
Have you watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
- You must be logged in to reply to this topic.